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THE   UNIVERSITY   OF   CHICAGO 

FOUNDED  BY  JOHN  D.  ROCKEFELLER 


CO-OPERATIVE  CREDIT  ASSOCIATIONS 
IN  THE   PROVINCE   OF  QUEBEC 


A   DISSERTATION 

SUBMITTED  TO  THE  FACULTY  OF  THE  GRADUATE  SCHOOL  OF  ARTS 

AND  LITERATURE  IN   CANDIDACY  FOR  THE  DEGREE  OF 

DOCTOR  OF  PHILOSOPHY 


(  DEPARTM ENT   OF  SOCIOLOGY ) 


BY 

HECTOR  MACPHERSON. 


KINGSTON: 
1910. 


I 


THE   UNIVERSITY    OF   CHICAGO 

FOUNDED   BY  JOHN  D.  ROCKEFELLER 


CO-OPERATIVE  CREDIT  ASSOCIATIONS 
IN  THE    PROVINCE   OF   QUEBEC 


A   DISSERTATION 

SUBMITTED  TO  THE  FACULTY  OF  THE  GRADUATE  SCHOOL  OF  ARTS 

AND  LITERATURE  IN    CANDIDACY   FOR  THE  DEGREE  OF 

DOCTOR  OF  PHILOSOPHY 

(department  of  sociology) 


BY 

HECTOR  MACPHERSON. 


KINGSTON: 
1910. 


Hsfr^'^ 


CONTENTS. 


PAGE 

Chapter  I. 
Historical   Survey,  Showing  the  Quebec  Associations  in 
Their   Relation   to  the   General   Co-operative   Credit 
Movement 1 

Chapter  II. 
The   Organization  and   Operation   of   a   Typical   French 

Canadian  Co-operative  Credit  Association 22 

Chapter  III. 
Economic  and  Social  Effects  of  Co-operative  Credit  AsoO- 

ciations  in  Quebec 49 

Chapter  IV. 
The  Possibilities  of  Co-operative  Credit  in  Canada  and  the 

United  States 74 


228277 


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http://www.archive.org/details/cooperativecrediOOmacprich 


CHAPTER  I. 


Erratum  (pp.  34-35)  :  The  maximum  aimed  at  in  the  reserve 
and  provident  funds  is  double  and  one-fmlf  the  amount  of  the 
paid  up  stock,  respectively.  This  is  true  of  the  Levis  society.  The 
rule  among  the  Quebec  associations  is  a  reserve  which  shall  be 
maintained  equal  to  the  total  amount  of  the  paid  up  stock  plus 
the  funds  held  on  deposit. 


Thanking  company,  from  whose  profits  every  member,  it  was 
expected,  would  derive  at  least  an  easy  livelihood."^  But,  com- 
ing down  to  our  own  times,  co-operative  credit  has  now  an 
unbroken  record  of  over  half  a  century  to  vouch  for  it,  and 
that  record  is  one  which  discloses  an  expansion  and  success 
which  are  trurly  marvelous. 

The  movement  took  its  rise  in  Germany,  which  has  been 
called  the  fatherland  of  co-operative  banking.  In  1850,  Herr 
Schulze,  Mayor  of  Delitzsch,  who  was  also  a  judge  and  a 
member  of  the  Prussian  National  Assembly  in  1848,  established 
in  Delitzsch-Eilenberg  his  first  loan  society  with  a  membership 
of  ten  artisans.  Two  years  later  he  remodeled  his  society  as  a 
self-supporting  institution,  with  a  share  capital.-     In  1856,  he 

^Mitford's  History  of  Greece,  iv.  22.    Quoted  by  J.  W.  Gilbert :  His- 
tory, Principles,  and  Practice  of  Banking,  i,  6-7. 

~C.  R.  Fay:    Co-operation  at  Home  and  Abroad,  19-20. 


CHAPTER  I. 

HISTORICAL   SURVEY,  SHOWING  THE  QUEBEC  SOCIETIES  IN  THEIR 

RELATION    TO    TtlE    GENERAL    CO-OPERATIVE 

CREDIT   MOVEMENT. 

Co-operation  for  the  purpose  of  making  credit  available  at  a 
reasonable  rate  of  interest  can  no  longer  be  looked  at  askance 
as  a  new  and  untried  phenomenon  in  the  economic  world.  In- 
deed, it  would  seem  that  the  idea  is  as  old  as  Xenophon.  He, 
it  is  said,  conceived  the  plan  of  a  bank  to  which  all  the  Athenian 
people  might  subscribe  capital,  and  in  the  profits  of  which  they 
might  all  share.  The  object  was  to  encourage  wisely  directed 
commercial  adventure  by  financial  support  at  rates  of  interest 
less  oppressive  than  were  extorted  at  that  time ;  and  inciden- 
tally to  enrich  the  public  treasury  as  well  as  the  private  citizens 
of  Athens.  "  Thus,  while  numbers  of  individuals  were  en- 
couraged and  enabled  to  employ  themselves  for  their  private 
benefits,  the  whole  Athenian  people  would  become  one  great 
banking  company,  from  whose  profits  every  member,  it  was 
expected,  would  derive  at  least  an  easy  livelihood."^  But,  com- 
ing down  to  our  own  times,  co-operative  credit  has  now  an 
unbroken  record  of  over  half  a  century  to  vouch  for  it,  and 
that  record  is  one  which  discloses  an  expansion  and  success 
which  are  trurly  marvelous. 

The  movement  took  its  rise  in  Germany,  which  has  been 
called  the  fatherland  of  co-operative  banking.  In  1850,  Herr 
Schulze,  Mayor  of  Delitzsch,  who  was  also  a  judge  and  a 
member  of  the  Prussian  National  Assembly  in  1848,  established 
in  Delitzsch-Eilenberg  his  first  loan  society  with  a  membership 
of  ten  artisans.  Two  years  later  he  remodeled  his  society  as  a 
self-supporting  institution,  with  a  share  capital.-     In  1856,  he 

^Mitford's  History  of  Greece,  iv.  22.    Quoted  by  J.  W.  Gilbert :  His- 
tory, Principles,  and  Practice  of  Banking,  i,  6-7. 

~C.  R.  Fay:   Co-operation  at  Home  and  Abroad,  19-20. 


Co-operative  Banking  in  Quebec. 


published  a  book  setting  forth  the  purpose  and  scope  of  his 
scheme.  Three  years  later  he  organized  the  ''Allgemeiner 
Verband  der  Deutschen  Erwerbs-  und  Wirtschafts-Genossen- 
schaften,"  of  which  he  was  director  until  his  death  in  1883.^ 
He  was  instrumental  in  securing  the  first  co-operative  law  in 
Prussia  in  1867,  which  was  made  an  imperial  law  in  1889.* 
Thus  arose  what  has  come  to  be  known  all  over  Europe  as  the 
town  or  industrial  type  of  co-operative  bank. 

About  the  same  time,  another  movement  took  its  rise  in  Ger- 
many which  has  meant  even  more  to  the  poorer  agricultural 
classes  than  the  town  bank  has  to  the  larger  landholders  and 
industrial  classes.  The  honor  of  first  establishing  rural  co- 
operative credit  associations  belongs  to  Herr  F.  W.  Raiffeisen, 
burgomaster  of  a  group  of  villages  around  Neuwied.  He  was 
a  man  of  great  mathematical  ability  and, of  broad  and  varied 
experience.  He  was  an  ex-soldier,  a  wine-merchant,  and  had 
rendered  valuable  service  in  superintending  the  building  of  a 
railroad  on  the  left  bank  of  the  Rhine. 

Touched  by  the  poverty  of  the  rural  classes  around  Neuwied, 
Raiffeisen  established,  in  1848,  a  co-operative  distributing  soci- 
ety for  the  purpose  of  assisting  the  poor  to  get  their  supplies 
of  potatoes  and  bread.  The  next  year,  under  the  patronage  of 
a  number  of  wealthy  philanthropists,  he  organized  a  credit  and 
loan  society  at  Flammersfeld,  designed  to  provide  credit  on 
easy  terms  to  needy  farmers.  The  great  importance  of  this 
association  rests  upon  the  fact  that  it  indirectly  determined  the 
trend  of  the  whole  future  movement  of  rural  co-operative 
credit  in  Europe.  One  thing  *  Raiffeisen  learned  from  this 
experiment.  He  became  forever  convinced  that  the  crying  need 
of  the  poor  was  not  for  philanthropic  aid,  but  for  some  sort  of 
organization  which  would  enable  them  to  obtain  credit  funds 
for  themselves.  Hence,  in  1862,  he  started  another  credit  and 
loan  society  at  Anhasen,  and  in  this  association  the  membership 
was  made  up  of  the  borrowing  farmers  themselves.^  Four 
years  later  Raift'eisen  published  his  essay,  "Die  Darlehenskassen- 


3Ibid.,  20.         4Ibid.,  21. 
«Ibid.,  19-20. 


Historical  Survey. 


vereine,"  in  which  he  commended  the  Schulze-DeHtzsch  type  of 
bank  for  towns  and  industrial  centres,  and  the  Anhausen  model 
for  agricultural  communities.  But  he  seems  gradually  to  have 
changed  his  mind;  and  from  1873  until  his  death,  in  1888,  he 
devoted  all  his  energy  to  the  furtherance  of  rural  associations 
of  the  Anhausen  type.^ 

With  the  establishment  of  these  two  models  of  co-operative 
credit  association,  there  was  started  a  movement  which  has  had 
a  tremendous  influence  on  the  rapid  agricultural  and  industrial 
development  of  Germany  during  the  past  sixty  years.  There 
is  scarcely  a  town  of  any  importance  but  has  its  town  bank. 
These  are  often  stately  edifices,  each  with  a  well  paid  staff  of 
clerks  and  officers,  where  the  most  important  banking  business 
of  the  city  is  transacted.  On  the  other  hand,  the  modest 
Raiffeisen  association  has  spread  among  the  agricultural  towns, 
villages,  and  rural  districts,  carrying  thrift,  ambition  and  pro- 
gress with  it  everywhere. 

In  1905.  there  were  in  Germany  1,020  banks  of  the  Schulze- 
Delitzsch  model,  with  a  total  membership  of  586,595.  Sixty 
per  cent,  of  these  members  availed  themselves  of  credit ;  and 
the  total  loans  granted  in  1905  amounted  to  3,000,000,000 
marks,  upon  which  was  charged  an  average  rate  of  5.05  per 
cent,  interest.  Of  the  country  banks,  the  number  for  Germany 
in  1905  stood  at  13,181.  The  10,786  of  these  associations  be- 
longing to  the  Imperial  Union,  for  which  reliable  statistics  were 
available,  had  a  membership  of  954,473,  and  had  granted  credit 
for  that  year  aggregating  500,000,000  marks,  at  a  rate  of 
interest  which  probably  averaged  about  one  per  cent,  less  than 
was  charged  by  the  town  banks.  The  average  credit  advanced 
per  member  was  500  marks,  as  compared  with  5000  marks  per 
member  granted  by  the  Schulze-Delitzsch  associations.'' 

But  the  co-operative  movement  has  by  no  means  been  con- 
fined to  the  country  of  its  origin.  In  1865,  Signor  Luzzatti 
established  the  Popular  Bank  of  Milan  with  an  initial  capital 
of  700  Hre,  of  which  the  founder  himself  subscribed  100  lire, 
thus  becoming  the  largest  shareholder  among  the  charter  mem- 
cibid.,  20.  ^ibid.,  48. 


Co-operative  Banking  in  Quebec. 


bers  of  the  association.^  But  this  small  beginning  furnishes 
but  a  slight  indication  of  the  subsequent  importance  of  the 
movement.  In  1906  there  were  829  town  banks  in  Italy,  with 
a  capital  of  133,000,000  lire,  deposits  of  700,000,000  lire,  and 
credits  to  the  amount  of  453,000,000  lire.  The  first  rural  bank 
in  Italy  was  established  by  Signor  Wollemborg,  a  doctor  of 
Lorregia,  in  1883.  By  1906  there  were  1,461  agricultural  asso- 
ciations in  operation  in  Italy.^  Through  this  system  of  rural 
co-operative  credit,  the  entire  agricultural  situation  has  been 
revolutionized;  and  not  only  has  great  material  progress  re- 
sulted, but  the  accompanying  intellectual  and  moral  advance- 
ment has  been  equally  great,  and  has  been  spoken  of  in  the 
highest  terms. ^° 

In  somewhat  similar  manner,  the  story  might  be  told  of  the 
way  in  which  country  after  country  has  been  invaded  by  the 
co-operative  credit  movement  until  almost  every  part  of  Europe 
has  felt  its  influence.  We  have  France  with  its  18  popular 
banks  and  1,638  rural  associations  in  1907;^^  Austria  and  Hun- 
gary, where  about  4,000  agricultural  credit  societies  were  in 
operation  in  1904;^-  and  Belgium  with  its  431  country  banks, 
December  1905,  and  a  prosperous  group  of  17  town  associations 
doing  business  in  1906.^^  The  movement  has  become  firmly 
rooted  in  Holland  and  Switzerland;  it  has  taken  possession  of 
Russia,  Finland,  Servia,  and  the  Grand  Duchy  of  Luxemburg; 
it  forms  part  of  the  general  plan  of  co-operation  by  means  of 
which  Sir  Horace  Plunkett  and  the  Irish  Agricultural  Organi- 
zation Society  are  bringing  about  a  much  needed  revolution 
among  the  poorer  agricultural  classes  of  Ireland;  and  it  is  being 
tried  by  the  British  Government  as  a  means  of  alleviating  the 
distress  of  the  poverty-stricken  millions  of  India.^*  Speaking 
of  the  Irish  situation,  in  his  book  published  in  1904,  Mr.  E.  A. 

sibid.,  63.  »Ibid.,  67-69. 

loE.  A.  Pratt,  The  Organization  of  Agriculture,  123. 

lie.  R.  Fay,  Co-operation  at  Home  and  Abroad,  68  and  72. 

12E.  A.  Pratt,  op.  cit.,  165  and  153. 

13C.  R.  Fay,  op.  cit.,  67-69. 

i*See  below  Ch.  iv,  page  74. 


Historical  Survey. 


Pratt  affirms  that  the  value  of  the  rural  credit  banks  in  Ireland, 
and  the  part  which  they  are  already  playing  in  the  general  agri- 
cultural and  economic  development  of  the  country,  could 
scarcely  be  over-estimated.^^  Mr.  Desjardins,  who  is  undoubt- 
edly the  best  authority  in  America  on  the  co-operative  credit 
movement,  estimates  that  the  number  of  associations  in  exist- 
ence must  now  be  somewhere  in  the  neighborhood  of  40,000, 
and  the  annual  turnover  is  probably  around  four  billions  of 
dollars.^^ 

From  this  imperfect  sketch  of  the  co-operative  credit  move- 
ment, we  can  readily  understand  that  a  study  of  the  societies 
which  are  spring  up  among  the  French  Canadians  on  the  banks 
of  the  River  St.  Lawrence  is  likely  to  present  but  little  that  is 
new  to  the  student  of  co-operation.  The  careful  student,  how- 
ever, is  well  aware  that  the  type  of  society  developed  in  one 
European  country  never  corresponds  in  all  detail  with  that 
evolved  when  the  principle  is  set  to  work  under  the  different 
conditions  of  another  country.  The  variations  arise  from  two 
causes.  Different  promoters  of  the  movement,  having  the  ex- 
perience of  other  leaders,  and  the  methods  of  organization  and 
operation  of  other  associations  before  them,  introduce  changes 
which  they  think  will  be  better  adapted  to  their  peculiar  set  of 
conditions.  Then,  too,  the  associations  are  so  democratic  that 
they  inevitably  take  on  differences  of  management,  and  show 
results  that  are  peculiar  to  the  genius  of  each  nationality  or 
class  within  a  nation,  among  whom  they  come  into  operation. 
Hence,  the  differences  of  environment  between  Europe  and 
America,  and  the  fact  that  the  French  Canadian  model  is  a  care- 
fully planned  attempt  to  meet  those  differences  by  adaptations 
based  on  the  combined  experience  of  European  countries,  may 
lend  to  this  investigation  enough  of  interest  to  make  it  worth 
while. 

As  in  the  case  of  most  of  the  European  movements,  this  in 
French  Canada  owes  its  being  to  the  energy  and  enthusiasm  of 

i^E.  A.  Pratt,  op.  cit.,  273. 

i^Alphonse  Desjardins,  The  Co-operative  or  Peoples'  Banks,  Bank- 
ers' Magazine,  Ixxviii,  922. 


Co-operative  Banking  in  Quebec. 


a  single  individual.  Mr.  Alphonse  Desjardins  was  born  at  Levis, 
Quebec,  in  1854.  He  graduated  from  the  college  of  his  native 
town  in  1870,  and  shortly  afterward  went  into  journalism.  He 
early  became  engrossed  in  the  study  of  economic  and  social 
science,  and  epsecially  was  his  attention  attracted  by  the  co- 
operative movement  which  was  spreading  over  Europe.  He 
had  studied  with  the  keenest  interest  the  rapid  development  of 
co-operation  in  Germany,  France,  Belgium,  Holland  and  Den- 
mark. This  latter  country  he  had  seen  pick  herself  up  from 
the  very  depths  of  despair  after  the  unfortunate  German  war 
of  1864,  in  which  she  lost  the  richest  of  her  territory,  and 
through  the  adoption  of  the  principles  of  co-operation  and  uni- 
versal education,  start  on  a  career  of  rejuvenated  prosperity 
such  as  she  had  never  known  before  her  mutilation.  He  saw 
clearly  the  important  part  which  the  Schulze-Delitzsch  and 
Raiffeisen  banks  had  played  in  the  industrial  advancement  of 
united  Germany;  and  he  also  knew  what  a  similar  system  of 
co-operative  credit  had  accomplished  for  Italy.  Moreover,  for 
the  past  thirteen  years,  he  has  had  the  advantage  of  being  in 
communication  with  most  of  the  European  leaders.  This  per- 
sonal correspondence  with  the  moving  spirits  of  co-operation  in 
the  old  world  has  placed  him  in  possession  of  a  great  deal  of 
information  on  the  subject  which  has  up  to  the  present  time 
never  been  published. 

Out  of  this  mass  of  heterogeneous  material  Mr.  Desjardins 
arrived  at  a  conviction  of  the  supreme  importance  of  the  prin- 
ciple of  adaptation.  First  of  all,  an  association  must  grow  out 
of  local  needs.  Denmark,  for  example,  the  country  which  has 
surpassed  all  others  in  co-operative  organization,  has  never 
adopted  the  credit  form  of  society.  Any  attempt  to  engraft  on 
society  an  institution  whose  function  is  already  adequately  and 
economically  performed  by  others,  would  only  be  a  useless  ex- 
penditure of  energy  and  multiplication  of  machinery.  Mr. 
Desjardins  has  perceived  that  the  success  of  co-operative  asso- 
ciations in  infusing  new  hope  and  energy  into  the  masses  who 
are  struggling  on  the  very  margin  of  subsistence,  lay  largely  in 
their  wide  range  of  adaptability.    Being  himself  a  reformer  and 


Historical  Survey. 


an  enthusiast,  as  leaders  of  all  sorts  of  schemes  for  the  uplifting 
of  men  must  necessarily  be,  he  at  once  began  to  look  about  for 
some  way  in  which  his  native  land  might  reap  some  benefit 
from  the  practical  application  of  those  principles  which  had 
helped  so  much  in  improving  conditions  among  the  poorer  and 
middle  classes  of  Europe. 

His  opportunity  presented  itself  in  the  usnolved  credit  and 
banking  problem  of  his  native  province.  The  frequent  refer- 
ences, in  the  press  and  on  the  floor  of  the  Canadian  Parliament, 
to  the  evil  and  extent  of  the  practice  of  usury  convinced  Mr. 
Des  jar  dins  that  the  solution  of  this  problem  would  mean  ines- 
timable benefit  to  his  country,  and  more  especially  to  his  fellow- 
citizens  throughout 'Eastern  Canada,  where  the  money-lender  is 
practically  the  only  resource  of  the  poorer  classes  who  may  find 
themselves  obliged  to  borrow.  He  had  the  precedent  of  Hun- 
gary, where  the  rural  districts  had  been  ground  down  for 
generations  under  one  of  the  most  oppressive  systems  of  usury 
which  the  student  of  practical  economics  has  ever  encountered. 
In  the  face  of  the  most  determined  opposition,  an  effective  sys- 
tem of  co-operative  credit  was  established,  which  drove  the 
entire  tribe  of  innkeepers  and  small  merchants,  whose  real 
business  was  the  practice  of  usury,  out  of  the  country.^^ 

But  here  in  French  Canada,  where  Mr.  Desjardins  was  born 
and  bred,  the  situation  had  some  peculiar  difficulties  of  its  own. 
The  population  of  the  province  of  Quebec  are  for  the  most  part 
descendants  of  a  hardy,  thrifty  stock  of  Northern  France,  who 
seem  to  have  brought  with  them  from  the  motherland  the  habit 
of  storing  their  earnings  in  hoards  of  coin.  Speaking  of  Canada 
under  the  French  regime,  Professor  Adam  Shortt  says :  "  The 
tendency  to  private  hoarding,  which  at  that  time  was  quite  com- 
mon and  natural  in  all  countries,  was  especially  characteristic 
of  the  French  peasantry,  and  has  remained  so  to  this  day  in 
both  France  and  Canada."^^  After  the  conquest,  "  a  large  and 
important  section  of  the  French  Canadians  possessed  small  in- 

17E.  A.  Pratt,  op.  cit.,  141-153. 

i^Adam   Shortt,  The  History  of  Canadian  Banking,  Currency  and 
Exchange,  Journal  of  the  Canadian  Bankers'  Association,  vi,  152. 


Co-operative  Banking  in  Quebec. 


dividual  hoards  of  specie,  composed  almost  entirely  of  old 
French  coins,  much  worn  and  considerably  over-rated ;  they 
were  distrustful  of  paper  money  and  exchanged  it  as  speedily 
as  possible  for  coins.  In  this  exchange,  local  prejudice  and  the 
interests  of  the  banks  favored  French  silver. "^^  The  banking 
institutions  of  French  Canada  were  but  little  patronized,  either 
in  the  use  of  their  notes,  or  as  repositories  for  savings.  But 
they  found  a  field  for  profit-making  in  the  collection  of  "  all 
the  maimed  and  wayworn  French  coins  on  the  continent,"  and 
passing  them  out  to  the  habitants  at  their  much  over-rated 
valuation.^^ 

This  custom  of  returning  bank  notes  for  redemption  in  coin 
had  a  steadying  efifect  upon  the  French  Canadian  banks  which 
placed  them  at  an  advantage  as  compared  with  the  banks  of 
Upper  Canada  and  the  United  States  in  time  of  crisis.  They 
v/ere  forced  to  exercise  caution  and  moderation  in  their  issue 
of  notes  by  the  fact  that  the  notes  were  usually  soon  >  returned 
for  redemption  in  coin.  The  amount  of  coin  thus  kept  in  cir- 
culation made  it  easier  for  the  Lower  Canadian  banks  to  re- 
plenish their  vaults  with  specie.  Thus,  for  example,  the  three 
French  Canadian  banks  experienced  much  less  difficulty  in 
weathering  the  crisis  of  the  early  twenties  than  did  the  banks 
of  the  United  States  and  Upper  Canada.  In  fact,  the  Quebec 
bank,  with  a  patronage  mostly  confined  to  a  select  circle  of 
merchants  within  and  about  the  city,  experienced  no  great  loss ; 
while  the  two  Montreal  banks,  though  they  suffered  severely, 
were  able  to  pull  through  in  solvent  condition. ^^ 

Another  episode  which  had  tended  to  shake  the  faith  of  the 
French  Canadians  in  banking  institutions  was  the  formation  of 
wild-cat  banking  schemes  under  the  lax  laws  existing  prior  to 
the  confederation  of  the  provinces.  These  spurious  banks 
found  their  opportuinty  in  two  circumstances.  There  was,  in 
the  first  place,  a  deep-rooted  race  prejudice  against  the  existing 
institutions,  which  were  almost  entirely  in  the  hands  of  the 

i9Ibid.,  vii,  319. 

2oibid.,  vii,  319;  viii,  152-154. 

2ilbid.,  viii,  2. 


Historical  Survey. 


English  element;  in  the  second  place,  the  suspension  of  specie 
payments  by  the  regular  banks  of  Lower  Canada,  in  common 
with  those  of  the  United  States,  during  the  crisis  of  1837,  gave 
the  best  possible  excuse  for  the  refusal  to  redeem  their  notes 
on  the  part  of  those  institutions  whose  sole  purpose  of  existence 
was  to  get  their  notes  into  circulation. 

Among  other  favoring  circumstances  was  the  fact  that  the 
first  bank  to  take  advantage  of  the  political  and  racial  situation 
was  a  perfectly  honest  and  patriotic  institution,  the  Banque  du 
Peuple  of  Montreal.  This  was  a  form  of  joint  stock  company 
whose  directors  pledged  themselves  to  unlimited  liability,  while 
ordinary  shareholders  were  liable  only  to  the  extent  of  their 
subscribed  stock.  The  notes  of  this  bank  were  soon  in  circula- 
tion, and,  on  political  grounds,  found  a  more  cordial  reception 
than  those  of  the  regular  chartered  banks.  However,  the  pur- 
pose of  this  organization  was  legitimate  business;  and  during 
the  crisis  the  Banque  du  Peuple  entered  into  hearty  co-operation 
with  the  regular  banks  in  weathering  the  storm  of  financial 
stringency.^^ 

The  real  evil  arising  out  of  the  establishment  of  this  institu- 
tion consisted  in  the  swarm  of  imitators  which  sprang  up.  The 
promoters  of  these  bogus  banks  were,  for  the  most  part,  sharp- 
ers from  the  neighboring  states,  who,  if  they  even  took  the 
trouble  to  establish  headquarters,  hired  someone  to  look  after 
the  obscure  office  in  Lower  Canada,  while  they  attended  to  the 
more  important  business  of  floating  the  spurious  paper  else- 
where. They  took  care  not  to  arouse  suspicion  by  trying  to 
push  their  trade  in  the  neighborhood  of  their  nominal  head- 
quarters ;  but  throughout  Western  Upper  Canada  and  the 
adjoining  states  they  managed  to  get  considerable  quantities  of 
their  notes  into  circulation.  In  this  they  were  favored  by  the 
scarcity  of  a  medium  of  exchange  consequent  upon  the  crisis. 
Many  a  suspicion  was  aroused,  to  be  sure,  but  so  long  as  all  the 
banks  in  Lower  Canada  were  refusing  to  redeem  their  notes, 
there  was  no  way  of  testing  the  solvency  of  these  concerns.  In 
the  meantime  the  notes  were  finding  their  way  back  to  Lower 
•      22ibid.,  ix.,  1-5. 


10  Co-operative  Banking  in  Quebec. 

Canada,  public  indignation  was  aroused  resulting  in  investiga- 
tions in  both  Buffalo  and  Montreal,  and  a  long  list  of  the 
issuers  of  spurious  bank  notes  was  published.-^ 

Now  it  cannot  be  said  that  the  French  Canadians  themselves 
suffered  any  serious  loss  as  a  result  of  these  banking  swindles ; 
and  yet  the  publishing  of  the  results  of  the  investigations  did 
add  considerably  to  the  long-standing  hereditary  prejudice  of 
the  average  habitant  against  banking  institutions  in  general. 

As  a  result,  the  old  tendency  to  hoard  still  persists  in  French 
Canada.  Thus,  one  side  of  the  problem  which  Mr.  Desjardins 
had  to  solve  was  whether  or  not  this  inherent  distrust  of  credit 
and  banking  institutions  would  make  the  establishment  of  co- 
operative credit  associations  among  his  countrymen  an  impossi- 
bility. Would  they  entrust  their  representatives  with  the  care 
of  their  funds,  and  thus  bring  the  combined  savings  of  the 
parish  into  a  common  fund  from  which  the  general  demand  for 
credit  could  be  met?  Or  would  the  tendency  to  hoard  their 
small  surplus  prove  too  strong  for  the  new  movement  and  leave 
the  usurer  still  in  control  of  the  credit  business?  Such  a  prob- 
lem could  only  be  solved  by  practical  experiment. 

He  did  not  expect  to  have  his  plans  meet  everywhere  with 
an  enthusiastic  reception.  But  seldom  have  the  ideas  of  any 
reformer  found  an  eager  multitude  waiting  to  receive  them. 
Even  those  principles  whose  subsequent  development  has 
shown  the  most  wonderful  vitality  have  generally  been  forced 
to  begin  their  career  by  fighting  for  bare  standing  ground.  This 
has  been  to  some  extent  true  of  the  whole  movement  toward 
economic  co-operation;  and  almost  without  exception  has  it 
been  true  of  the  credit  and  banking  associations.  In  summing 
up  his  conclusions,  based  upon  a  thorough  acquaintance  with 
the  subject,  Mr.  Henry  W.  Wolff  finds  that  the  movement  has 
everywhere  met  with  the  same  fate.  At  the  outset  no  country 
has  wanted  it.  No  people  has  anticipated  that  co-operative 
credit  was  adapted  to  its  peculiar  conditions.  Almost  invariably 
has  the  founder  met  with  the  same  cold  indifference.^*    Schulze 

23Ibid.,  ix,  190  et  seq. 

24Henry  W.  Wolff,  Co-operative  Banking,  137. 


Historical  Survey.  11 

and  Raiffeisen  in  Germany,  Luzzatti  in  Italy,  Ziller  in  Austria, 
and  other  leaders  almost  as  illustrious,  have  begun  by  bearing 
almost  the  whole  burden  of  the  work  which  has  since  reached 
such  proportions  in  their  respective  countries.  But  in  every 
case,  when  the  energy  and  enthusiasm  of  the  reformer  had  pre- 
vailed, and  co-operative  banking  taken  its  place  among  the 
economic  and  social  forces  of  the  country,  there  has  been  no 
lack  of  praise  and  approval ;  and  people  have  wondered  how 
they  ever  managed  without  the  credit  associations.  Everywhere 
the  experience  with  usury  has  been  the  same.  Co-operative 
credit  has  done  for  Europe,  within  the  short  period  of  six  de- 
cades, what  century  after  century  of  religious  condemnation 
and  repressive  legislation  had  utterly  failed  to  accomplish. 
These  societies  are  meeting  in  a  legitimate  and  most  satisfactory 
way  that  fundamental  need  of  credit  which  constituted  the 
raison  d'etre  for  the  usurer's  practice.  Hence,  where  co- 
operative credit  found  its  place  in  the  social  organism, 
the  usurer  was  sloughed  of  as  a  superfluous  economic 
appendage.  Upwards  of  forty  thousand  peoples'  banks  are 
cleaning  out  the  plague  of  usury  which  had  infested  the  old 
world  from  its  earliest  history,  with  the  same  unobtrusive  cer- 
tainty which  has  marked  the  disappearance  of  other  pests 
before  the  advance  of  modern  medicine  and  sanitary  science. 

With  the  history  of  this  whole  movement  Mr.  Des  jar  dins 
was  perfectly  familiar.  He  had  every  confidence  in  co-opera- 
tive credit  as  a  ninstrument  in  furthering  social  and  economic 
progress;  and  saw  no  reason  why  its  introduction  should  not 
be  a  success  among  his  fellow-countrymen  in  Quebec.  So,  fol- 
lowing the  example  of  many  a  worthy  predecessor  in  the  differ- 
ent countries  of  Europe,  he  began  his  propaganda  in  his  own 
town. 

Levis,  the  birthplace  and  presen  thome  of  Mr.  Desjardins,  is 
a  city  of  some  seven  thousand  inhabitants,  situated  on  the  right 
bank  of  the  Saint  Lawrence,  directly  opposite  the  old  historic 
citadel  of  Quebec.  The  population  is  chiefly  industrial.  A 
large  number  are  railway  employees ;  others  are  engaged  in  the 
Atlantic  and  inland  shipping  trade  which  is  centred  during  the 


12  Co-operative  Banking  in  Quebec. 

summer  months  in  the  cities  of  Montreal  and  Quebec;  while 
two  or  three  foundries,  two  machine  shops,  and  a  shoe  factory 
give  employment  to  an  industrious,  wage-earning  citizenship. 
Back  of  the  town  to  the  south  and  east  is  a  well-to-do  agricul- 
tural population  from  which  the  business  section  of  the  city 
draws  its  chief  support.  This  surrounding  rural  district  ac- 
counts for  the  numerous  homes  of  retired  farmers,  who  form  a 
stable,  conservative  yet  thrifty  element  in  all  such  agricultural 
market  towns. 

In  this  limited  population,  composed  of  those  having  such 
varied  interests,  Mr.  D'esjardins  found  just  what  he  wanted. 
His  purpose  was  to  put  co-operative  credit  to  the  test  upon 
American  soil.  If  it  should  succeed  at  Levis,  there  would  be  a 
practical  demonstration  of  its  adaptability  to  almost  any  condi- 
tions to  be  met  with  anywhere  in  French  Canada. 

Among  the  diverse  elements  which  make  up  the  population 
of  Levis,  Mr.  Desjardins  was  a  well-known  personality.  He 
had  grown  up  in  the  place.  From  childhood  he  had  been  known 
and  respected  for  his  integrity.  His  training  in  the  college  of 
the  town  had  brought  him  into  sympathy  with  the  cultural  and 
religious  life  of  his  people.  His  career  as  a  journalist  had 
increased  his  familiarity  with  all  the  different  problems  and 
needs  of  his  native  province.  His  contagious  enthusiasm  and 
firm  perseverance  eminently  fitted  him  for  leadership.  Surely 
it  would  have  been  hard  to  find  one  better  fitted  to  undertake 
the  establishment  of  co-operative  credit  associations. 

On  the  public  platform  and  through  the  medium  of  the  press, 
and  in  private  intercourse  among  his  large  circle  of  acquaint- 
ances, he  lost  no  opportunity  of  arousing  interest  in  the  move- 
ment. He  explained  the  advantages  it  had  already  brought  to 
different  countries  of  Europe,  and  showed  the  benefits  which 
there  was  every  re'ason  to  expect  from  its  establishment  among 
his  fellow-countrymen. 

At  length  the  time  seemed  ripe  for  action.  In  September, 
1900,  he  brought  a  dozen  friends  together  at  his  home,  and 
carefully  unfolded  to  them  his  plan.  During  the  three  months 
following  they  drafted  a  constitution,  and  began  taking  pledges 


Historical  Survey.  13 


for  the  first  shares  of  stock,  which  were  to  be  paid  for  subse- 
quently in  instalments.  Then,  on  the  sixth  of  December  a 
meeting  was  held  at  which  about  fifty  of  the  more  spirited  citi- 
zens of  Levis  formally  adopted  the  constitution  and  by-laws, 
and  began  business  as  "  La  Caisse  Populaire  de  Levis."  The 
following  twenty-fifth  of  January  there  appeared  the  first  semi- 
monthly statement,  showing  assets  on  hand  to  the  amount  of 
$242.  This  must  surely  be  considered  a  fair  start,  when  we 
take  into  consideration  the  small  beginnings  and  early  struggles 
of  most  of  the  great  European  movements. 

As  to  the  subsequent  growth  and  prosperity  of  the  People's 
Bank  of  Levis,  we  will  permit  a  few  statistics  to  tell  their  own 
story.  By  the  end  of  the  fourth  year  of  its  existence  the  assets 
amounted  to  $32,567.55,  and  since  that  time  they  have  shown 
a  steady  and  rapid  increase,  as  is  shown  by  the  following  table : 

Yearly  Increase  in  Assets  for  the  People's  Bank  of  Levis. 

Nov.  30,  1904 $  32,567  56 

Nov.  30,  1905   36,028  31 

Nov.  k>,  1906  43,529  80 

Nov.  30,  1907  66,352  24 

Nov.  30,  1908 83,891  35 

Nov.  30,  1909  102,870  35 

Then  again,  no  better  indication  of  the  prosperity  and  use- 
fulness of  an  institution  of  this  kind  could  be  asked  for  than 
is  furnished  by  the  increase  and  volume  of  its  loans.  The  fol- 
lowing table  from  the  ''  Ninth  Annual  Report  of  the  People's 
Bank  of  Levis  "  speaks  eloquently  of  the  service  being  rendered 
to  the  community  by  this  association : 

The  Loan  Movement  of  the  People's  Bank  of  Levis. 

First  year 50  loans,  amounting  to  $    3,667  21 

Second  year   161  "  "  19,800  26 

Third  year 275  "  "  27,036  34 

Fourth  year   268  "  "  34,272  68 

Fifth  year   298  "  "  40,586  80 

Sixth  year  368  "  "  64,766  72 

Seventh  year   461  "  "  86,963  15 


14  Co-operative  Banking  in  Quebec. 

Eighth  year  518        "  "  75,572  97 

Ninth  year 638  '     "  "  110,404  47 

Totals 3037  $463,070  60 

The  present  condition  of  the  People's  Bank  of  Levis  would 
seem  to  indicate  that  its  future  progress  is  assured.  But  we 
must  not  imagine  that  this  success  has  been  won  without  sacri- 
fice. The  founder  was  enthusiastic  in  his  determination  to  give 
the  experiment  every  possible  chance  of  success.  In  the  home 
of  Mr.  Desjardins  the  society  was  organized,  and  for  the  first 
six  years  of  its  existence  it  found  free  headquarters  in  his 
private  office.  Hither  came  all  the  members  to  pay  the  instal- 
ments on  their  shares.  Here,  they  negotiated  loans  and 
transacted  any  other  business  they  might  have  with  the  asso- 
ciation. Furthermore,  Mr.  Desjardins,  as  manager  and  presi- 
dent of  the  society,  undertook  to  do  the  whole  work  of  keeping 
the  accounts,  etc.,  without  a  cent  of  remuneration.  While  he 
was  away  on  official  duties  during  the  sessions  of  the  Dominion 
Parliament  other  members  of  his  family  kept  the  books  and 
assisted  the  council  and  committees  in  transacting  the  business 
of  the  association.  During  his  visit  at  Levis,  the  writer  had 
access  to  the  books  of  the  association  dating  from  its  organi- 
zation. In  explanation  of  a  great  section  of  one  of  the  books 
which  was  written  in  a  dainty  feminine  hand,  the  president  re- 
marked with  some  degree  of  justifiable  pride:  ''  That  was  the 
first  time  that  I  had  been  compelled  to  be  so  long  absent  since 
La  Caisse  was  organized.  I  was  worried  about  the  management 
of  the  bank,  and  especially  over  the  keeping  of  the  books.  One 
evening,  to  my  surprise,  my  wife  volunteered  to  look  after  the 
bookkeeping.  It  would  mean  some  hard  work  on  her  part ;  but 
just  then  it  looked  as  if  the  only  alternative  would  be  to  hire  a 
bookkeeper.  We  were  putting  forth  every  efifort  to  accumulate 
a  reserve  fund,  and  I  feared  that  we  could  not  very  well  bear 
such  expense  at  that  time.  I  brought  the  matter  of  my  wife's 
ofifer  of  her  services  before  the  council  of  administration,  and 
they  were  willing  that  she  should  try  the  work  with  the  assist- 
ance of  the  council  and  committees.    The  result  was  that  Mrs. 


Historical  Survey.  15 

Desjardins  did  the  bookkeeping  for  the  whole  winter.  Thous- 
ands of  dollars  of  business  was  transacted,  as  you  can  see,  and 
the  books  were  found  correct  to  a  fraction  of  a  cent." 

And  so  it  came  about  that  during  the  first  six  years  of  the 
existence  of  the  Levis  association  the  total  expense  of  operation, 
including  printing,  was  but  $543.57.  But  in  the  same  period 
a  reserve  fund  of  $3,341  was  accumulated;  and  the  sense  of 
security  against  any  possible  mischance  which  this  reserve  war- 
ranted more  than  compensated  President  Desjardins  and  his 
family  for  all  the  sacrifice  which  they  had  made.  At  the  end 
of  the  sixth  year  the  prosperity  and  growth  of  the  bank  justi- 
fied an  increase  in  expenditure.  Offices  were  secured  in  the 
business  section  of  the  town,  and  a  manager  was  regularly  paid 
to  keep  the  books  and  attend  to  the  office  work,  while  Mr. 
Desjardins  still  retained  his  position  as  president.  With  such  a 
record  of  devotion  as  this  we  can  readily  understand  the  pros- 
perity which  has  attended  the  Levis  association.  Moreover, 
the  example  of  self-sacrifice  set  by  the  management  of  this 
pioneer  society  has  not  been  without  its  influence  upon  the  new 
associations  which  are  now  springing  up  all  over  the  province. 

But  since  Mr.  Desjardins  looked  upon  the  Levis  society  in 
the  light  of  an  experiment,  he  was  not  particularly  anxious  for 
the  establishment  of  other  associations  until  this  one  should 
have  been  given  a  fair  trial.  There  was  as  yet  no  law  providing 
for  the  establishment  of  such  institutions ;  so  that  La  Caisse 
remained  a  purely  voluntary  organization  for  the  first  six  years 
of  its  existence.  Nevertheless,  the  year  after  the  formation  of 
the  Levis  People's  Bank  another  association  on  identical  lines 
was  organized  in  the  neighboring  rural  parish  of  St.  Joseph  de 
Levis.  Here,  although  the  nature  of  the  community  made  im- 
possible such  rapid  expansion  as  in  the  case  of  the  Levis 
society,  the  progress  has  been  steady  and  the  business  con- 
sistent with  the  needs  of  the  membership. 

Then  in  January,  1905,  another  association  on  the  Levis 
model  was  started  at  St.  Malo,  in  the  eastern  outskirts  of  Que- 
bec city.  The  expansion  of  this  society  seems  to  have  been 
rapid  from  the  beginning.    An  article  in  the  "  Labour  Gazette  " 


16  Co-operative  Banking  in  Quebec. 

for  March  of  that  year  reports  that  two  hundred  members  had 
already  been  enrolled,  and  the  record  shows  a  steady  growth 
since. 

But  the  time  seemed  to  have  arrived  when  a  wider  expansion 
of  co-operative  credit  was  justifiable  and  highly  desirable.  The 
experience  with  these  three  associations  had  furnished  sufficient 
evidence  of  the  fact  that  such  societies  could  be  made  potent 
factors  in  promoting  the  social  and  economic  well-being  of 
French  Canadian  communities.  All  the  expectations  of  the 
ardent  promoter  had  been  fulfilled ;  and  he  was  now  anxious 
for  provincial  recognition.  He  wanted  a  law  which  would 
make  regular  and  legal  what  had  up  to  this  time  been  a  purely 
voluntary  and  extra-legal  association. 

We  have  already  noticed  that  it  took  Schulze  seventeen  years 
to  secure  legal  recognition  from  the  Prussian  Assembly,  and 
that  it  was  not  until  twenty-two  years  later  that  the  law  was 
adopted  for  the  empire.  Mr.  Desjardins  found  it  much  easier 
to  obtain  recognition  through  a  provincial  law.  Indeed,  it 
could  scarcely  be  otherwise,  as  we  see  from  a  glance  at  the  poli- 
tical and  industrial  situation  in  French  Canada. 

Patriotic  and  enlightened  French  Canadians  were  painfully 
conscious  of  the  fact  that  their  race  was  far  from  taking,  in 
the  industrial,  political,  and  cultural  life  of  America,  the  place 
which  their  great  national  traditions  would  lead  us  to  expect 
that  they  should  occupy.  The  manifestation  of  this  conscious- 
ness was  to  be  seen  in  the  fervent  efforts  which  a  few  of  the 
more  progressive  spirits  were  making  towards  the  promotion 
of  educational  and  industrial  reform.  To  be  sure,  they  were 
forced  to  march  at  a  slow  and  cautious  pace;  for  they  found 
themselves  opposed  by  a  powerful  element  in  both  church  and 
state  which  prefers  to  burn  life's  taper  in  adoration  of  the  dry 
bones  of  a  dead  past.  These  widely  sundered  points  of  view 
have  been  the  cause  of  a  considerable  expenditure  of  energy 
in  speech  and  writing,  which  on  the  whole  seems  to  be  resulting 
in  at  least  a  partial  victory  for  the  progressive  element.  A  sys- 
tem of  technical  schools  is  in  process  of  establishment,  which,, 
if  carried  through,  would  be  a  credit  to  any  people. 


Historical  Survey.  17 


From  this  opposition  of  conservatives  and  radicals,  Mr.  Des- 
jardins  stood  entirely  aloof.  He  worked  away  quietly,  and 
incidentally  secured  the  hearty  support  of  both  factions.  The 
church,  with  which  every  French  Canadian  movement  has  to 
reckon,  had  the  precedents  of  Italy,  Austria,  Hungary,  Belgium 
and  other  European  coutnries  where  the  Catholic  clergy  were 
the  foremost  promoters  of  co-operative  banking.  The  progres- 
sive element,  on  the  other  hand,  hoped  that  the  movement  might 
result  in  benefits  similar  to  those  which  had  been  realized  from 
its  establishment  in  Europe.  Besides,  if  an  object  lesson  nearer 
home  were  required,  here  were  three  prosperous  crdit  associa- 
tions flourishing  right  beneath  the  shadow  of  the  provincial 
legislative  halls.  Mr.  Desjardins  had  many  warm  supporters 
in  the  legislature  who  were  in  sympathy  with  his  aims,  and  saw 
the  value  of  the  associations ;  and  so  it  came  to  pass  that  when 
the  Quebec  Syndicates  Act  of  1906  came  before  the  legislature, 
it  was  passed  without  a  single  dissenting  vote. 

This  act  is  described  in  the  "  Labour  Gazette  "  of  April,  1906, 
as  "  an  act  to  regularize  the  formation  and  organization  of  co- 
operative societies  among  the  laboring  classes  of  the  province, 
.  .  .  going  into  force  on  the  day  of  its  sanction.  It  provided 
for  the  formation  of  production,  consumption  and  credit  asso- 
ciations of  a  co-operative  character  at  any  place  in  the  province,, 
the  territory  within  which  an  association  is  empowered  to 
operate  being  confined  to  the  limits  of  a  provincial  electoral 
district.  The  responsibility  of  members  of  co-operative  associa- 
tions is  to  be  limited  to  the  amount  of  their  respective  shares, 
and  only  persons  domiciled  within  the  limits  of  the  association 
being  permitted  to  become  members." 

In  the  matter  of  liability,  limits  of  territory  for  each  associa- 
tion, and,  in  fact,  throughout  the  general  provisions  of  the  act, 
we  see  everywhere  the  influence  of  the  constitution  and  by-laws 
of  La  Caisse  Populaire  de  Levis  and  its  two  sister  institutions. 
As  these  will  be  somewhat  fully  analyzed  in  the  next  chapter, 
we  need  not  tarry  now  over  the  provisions  of  the  act. 

The  immediate  result  of  the  passing  of  the  act  was  an  awak- 
ening of  interest  in  co-operative  credit  over  the  entire  province. 


18  Co-operative  Banking  in  Quebec. 

Letters  of  enquiry  and  requests  for  copies  of  the  constitution 
and  by-laws  of  the  Levis  society  began  to  arrive  from  all  direc-. 
tions.  Scarcely  a  week  passed  but  some  parish  sent  in  a  petition 
that  Mr.  Desjardins  come  in  person  and  explain  the  organiza- 
tion and  advantages  of  his  associations.  These  invitations  are 
gladly  accepted  whenever  it  is  possible  for  him  to  get  away 
from  other  duties ;  and  each  such  meeting  usually  results  in  the 
formation  of  a  new  society.  The  following  list  of  associations, 
indicating  the  location  of  each,  will  give  an  idea  of  the  spread 
of  the  movement  up  to  the  close  of  the  last  fiscal  year.  Several 
societies  have  been  organized  since,  and  in  a  recent  communi- 
cation Mr.  Desjardins  states  that  he  has  about  sixty  applica- 
tions for  assistance  in  establishing  new  banks  during  the  coming 
spring  and  summer.  As  the  geographical  distribution  of  the 
,  following  societies  indicates,  the  province  has  been  invaded 
from  one  extremity  to  the  other.  According  to  all  the  reports 
available  the  associations  are,  without  exception,  doing  well; 
so  that  there  would  seem  to  be  no  reason  in  the  world  why  the 
movement  should  not  continue  until  the  province  of  Quebec  is 
as  well  equipped  with  co-operative  credit  facilities  as  many 
European  countries  already  are.^^ 

Name  and  Date  of  Secretary 

Locality.  Formation.    President.  or  Manager 

La  Caisse 

Populaire  de  Levis, Dec.  6, 1900    Mr.  A.  Desjardins.        Mr.  Desjardins. 
"     St.  Joseph  de  Levis,  July,  1901     Col.  G.  Vien.       H.  Bourassa,  Sec.Mgr. 

"     St.  Malo  Jan.,  1905     M.  Marquis.  Jos.  Delisle,  Mgr. 

"     Paquetteville Sept.,  1907     M.  Lazure.        M.  Lapalme,  Sec.  Mgr. 

"    St.  Bonaventure  ...Nov.,  1907    Rev.  M.  Gravel.  Geo.  Forest,  Sec.Mgr. 

"     St.  Isidore  Dec,  1907    Rev.  M.  Roy. 

"     Contrecoeur  Feb.,  1908    Rev.  M.  Ducharme. 

"    Quebec  Apr.  27,  1908    Dr.  J.  H.  Bedard. 

H.  Lamontagne,  Sec.  Mgr. 
"     Nominingue  ....Mar.  22,  190S 
"     Beauport  ........  May  3,  1908 

25Note:  In  a  letter  of  July  5,  1910,  Mr.  Desjardins  gives  the  number 
of  banks  established  up  to  date  as  44;  and  informs  us  that  the  interest 
in  the  movement  is  increasing  in  all  sections  of  the  province. 


Historical  Survey. 


19 


La 


Name  and  Date  of 

Locality.  Formation 

Caisse 
St.  Gregoire  du  Sault 

Montmorency May,  1908 

Montreal   June,  1908 

Maria Sep.  13,  1908 

Rimouski Sep.  17,  1908 

Cabana  Sep.  20,  1908 

I'Ancienne  Lorette, Dec.  16,1908 

St.  Sauveur Dec,  1908 

St.  Charles  de  Bellechasse, 

Jan.,  1909 
rimmaculee  Conception 

de  Montreal  ....Jan.  1,  1909 
St.  Victor  de  Tring, 

Beauce June  27,  1909 

St.  Narcisse  de  Cham,- 

plain  July  4,  1909 

Danville July  11,  1909 

Black  Lake July  18,  1909 

St.  Maurice  de  Cham- 
plain  Aug.  1,  1909 

Sayabec-Rimouski,  Aug.  8,1909 


President. 


Rev.  M.  Ruel. 
L.  Lefevre. 
Rev.  M.  Smith. 
L.  G.  Belzil. 
Rev.  E.  Gagnon. 
Rev.  M.  Faucher. 
Dr.  Jos.  Gosselin. 

Rev.  M.  Page. 


Secretary 
or  Manager 


L.  G.  Belzil,  Mgr. 

Dr.  Cote,  Mgr. 

M.  Drolet,  Mgr. 


M.  Paquct,  Mgr. 


Rev.  Recteur  Daignault,  S.J. 
Rev.  A.  Morissette. 

Jean  Rancourt,  Mgr. 
Rev.  Prosper  Cloutier. 

J.  A.  Gravel,  M.P.,  Mgr. 
Rev.  J.  E.  Hebert.  Felix  Laclare,  Sec. 
Rev.  Jos.  Gagnon.  J.  A.  Pinchaud,  Sec. 

Rev.  J.  U.  Croteau,  Mgr. 


Rev.  M.  T.  Caron.    Z.  Forest,  Sec.Mgr. 
Rev.  J.  C.  Saidon. 

Geo.  Tremblay,  Sec.  Mgr. 
Thetford  Mines,  Aug.  22, 1909    Rev.  J.  G.  Goudreau. 

Emile  Vaillancourt,  Sec.  Mgr. 
St.Theophile  du  Lac,  comte 

de  Champlain...Sep.  6,  1909 
de  I'Enfant  Jesus,  comte 

de  Beauce  ....Sep.  19.  1909 
de  St.  Ulric  de  Matane,  comte 
de  Rimouski. . .  Sep.  26,  1909 
de  St.  Ephriam,  comte 

de  Beauce  Oct.  3,  1909 

de  St.  Paul  de  la  Grand- 
Mere,  comte  de  Rimouski, 
Sep.  26,  1909 


Rev.  J.  P.  Boulay.  S.  Lucien,  Sec.  Mgr. 
C.  A.  Bilodeau.  Jos.  Nadeau,  Sec. 

Rev.  Jos.  Jobin,  Mgr. 
P.  C.  Saidon. 

David  Oullet,  Sec.  Mgr. 
L.  M.  Morrissette. 

U.  E.  Page,  M.P.,  Sec.  Mgr. 


Rev. 


Rev. 


de  Trois  Riviers,  Oct.  17, 1909 


Rev.  L.  R.  Lafleche. 

J.  H.  Desroches,  Sec.  Mgr. 
Rev.  Jules  Massicotte. 

A.  Lebrun,  M.P.,  Sec.Mgr. 


Having  got  the  movement  in  Quebec  so  well  under  way,  the 
next  concern  of  Mr.  Desjardins  was  to  secure  an  act  from  the 


20  Co-operative  Banking  in  Quebec. 

Dominion  Parliament  which  would  place  similar  associations 
on  a  basis  of  legality  and  uniformity  for  all  the  different  pro- 
vinces. A  bill  was  framed  after  the  model  of  the  Quebec 
Syndicates  Act  of  1906,  and  introduced  before  the  House  of 
Commons  in  1907.  The  bill  was  referred  to  a  committee  of 
enquiry,  and  strongly  recommended.  But,  as  it  was  then  late 
in  the  session  no  action  was  taken  that  year. 

Perhaps  one  influence  in  holding  the  bill  over  was  the  strenu- 
ous opposition  of  the  Retail  Merchants'  Association  of  Canada 
to  the  distributive  part  of  the  act.  The  delay  enabled  them  to 
thoroughly  muster  their  forces  for  the  next  attack;  so  that 
when  the  bill  came  up  again,  in  the  session  of  1908,  they  were 
prepared  to  fight  it  to  a  finish.  Yet  in  spite  of  all  opposition 
the  act  passed  the  Commons  unanimously.  In  the  Senate,  how- 
ever, the  opposition  faction  had  more  supporters,  and  the  bill 
was  thrown  out  by  a  majority  of  one. 

At  the  time  of  writing,  the  bill,  in  a  somewhat  modified  form, 
is  before  parliament  again ;  and  it  has  been  referred  to  Banking 
and  Commerce  Committee  for  detailed  consideration.  The  same 
opposing  forces  are  arrayed  against  it  with  more  determination 
than  ever.  Though  somewhat  discouraged,  Mr.  Desjardins  is 
still  fighting  the  battle  of  co-operation.  He  has  divided  the  act 
into  two  bills,  one  dealing  with  co-operative  credit,  and  the  other 
providing  for  the  productive  and  distributive  forms  of  co-opera- 
tive activity.  Should  the  opposition  to  distributive  societies 
prove  too  strong,  he  hopes  still  to  be  able  to  save  the  part  of  the 
act  providing  for  credit  associations.* 

But,  in  the  meantime,  the  work  of  Mr.  Desjardins  has  at- 
tracted attention  and  is  receiving  recognition  farther  away  from 
home.  As  an  expert  in  his  field,  he  was  called  to  deliver  an 
address  before  the  Twentieth  Century  Club  of  Boston.^^    Later 

*Note :  The  bill  providing  for  co-operative  production  and  distribu- 
tion was  defeated  in  the  Commons  by  a  small  majority.  The  one  deal- 
ing with  credit  societies  never  came  up  for  the  final  reading,  and  so  died 
a  natural  death.  The  friends  of  the  bill,  however,  are  confident  that 
next  year  there  will  be  a  different  story  to  tell. 

2«See  the  "Bankers'  Magazine,"  Ixxviii,  922 ;  or  the  Labour  Gazette, 
X,  103. 


Historical  Survey.  21 

he  was  asked  to  confer  with  the  Banking  committee  of  the  State 
Legislature  of  Massachusetts,  on  the  subject  of  legislation  to 
establish  and  control  co-operative  credit  associations.  On  the 
basis  of  the  report  of  this  committee,  the  legislature  passed  an 
act  providing  for  the  organization  of  societies  throughout  the 
Commonwealth  of  Massachusetts,  similar  to  those  operating  in 
Quebec.  This  act  became  law  in  the  spring  of  1909,  and 
shortly  afterward  the  pioneer  society  made  its  appearance  in 
Springfield.  Since  then  a  committee  of  the  legislature  has  been 
commissioned  with  the  task  of  drafting  a  model  constitution 
and  by-laws.  These  have  been  prepared,  and,  together  with 
literature  setting  forth  the  advantages  of  co-operative  credit, 
were  sent  to  Mr.  Desjardins  for  revision.  He  writes  stating 
that  these  are  now  about  ready  for  publication,  and  that  he 
expects  the  movement  in  Massachusetts  will  soon  be  started 
in  earnest. 


CHAPTER  11. 

THE  ORGANIZATION   AND  OPERATION  OF  A  TYPICAL  FRENCH 
CANADIAN  CO-OPERATIVE  CREDIT  ASSOCIATION. 

To  the  reader  who  is  unfamiHar  with  the  co-operative  credit 
associations  of  Europe,  the  name  ''  La  Caisse  Populaire  de 
Levis  ',  would  convey  but  a  very  imperfect  conception  of  the 
purpose  and  scope  of  the  modest  institution  at  Levis.  But  the 
person  who  had  come  in  contact  with  the  broad  humanitarian 
spirit  animating  the  whole  organization  and  activity  of  the 
town  and  country  banks  of  Europe  would  expect  to  find  the 
French  Canadian  societies  dominated  by  something  more  than 
the  purely  economic  motive.  The  men  who  had  breathed  their 
spirit  into  that  system  of  associations  which  has  spread  over 
Europe  and  India  were  more  than  financiers,  and  much  more 
than  political  economists  in  the  narrow,  classical  sense.  Schulze 
and  Raiffeisen,  Luzzatti  and  Wollemborg  were  all  of  them  men 
to  whom  human  welfare  was  the  all-important  consideration. 
They  valued  institutions  in  proportion  to  their  efficiency  in 
serving  men,  and  never  looked  upon  human  beings  merely  as 
one  of  the  factors  in  production.  They  were  separated  by  a 
whole  world-view  from  that  class  of  antiquated  thinkers  who 
prize  **  cheap  labor  "  and  a  stupid,  plodding  peasantry  as  the 
only  foundation  upon  which  the  economic,  political  and  reli- 
gious institutions  of  a  country  can  stand  secure.  They  ewre 
men  to  whom  "  cheapness,"  poverty  and  ignorance  were  always 
distressing.  In  a  sense  they  were  philanthropists ;  and  yet  they 
were  far  from  practising  that  type  of  short-sighted  philan- 
thropy which,  by  giving  without  requiring  effort  in  return,  de- 
prives human  beings  of  that  independence  and  self-reliance 
which  is  the  fundamental  quality  of  manhood.  Raiffeisen,  as 
we  have  seen,  did  start  out  on  the  charity  plan  of  relieving  dis- 
tress, but  soon  came  to  the  conclusion  that  education  and  a 
proper  organization  of  their  own  latent  forces  was  all  that  was 


A  Typical  Society.  23 

necessary  to  uplift  the  poor.  And  so  it  came  about  that  self- 
help  was  made  the  basis  of  the  co-operative  credit  movement. 
It  was  a  plan  to  enable  the  poorer  class  to  lay  for  themselves 
the  economic  basis  which  must  necessarily  underlie  all  other 
progress. 

Where  Raiffeisen  had  arrived  after  years  of  experience,  Mr. 
Desjardins  took  his  point  of  departure.  He  stood  steadfastly 
for  self-help,  a  consciousness  of  social  solidarity,  and  a  free 
field  to  work  in,  as  the  fundamental  conditions  of  human  wel- 
fare. The  breadth  of  his  view,  and  the  general  spirit  of  the 
man  are  so  well  embodied  in  the  second  article  of  the  constitu- 
tion of  the  People's  Bank  of  Levis,  which  sets  forth  the  objects 
of  the  association,  that  we  here  reprint  the  article  in  full : 

Article  2. — The  objects  of  the  association  are: 

1.  To  protect  its  members  against  reverses  of  fortune,  the 
results  of  enforced  idleness,  sickness  and  want,  by  teaching 
them  the  inappreciable  benefits  of  wise  providential  measures 
based  on  mutual  assistance  and  co-operation,  and,  in  particular, 
by  instilling  and  developing  in  them  the  taste  for,  and  the  con- 
stant and  energetic  practice  of,  economy  on  the  n^ost  modest 
scale ; 

2.  To  aid  them  by  a  wise  and  prudent  system  of  credit  in 
the  shape  of  loans  and  advances,  the  proposed  employment 
whereof  must  be  communicated  to  the  association,  be  ap- 
proved by  it,  and  be  in  accordance  with  the  spirit  in  which  it 
is  founded; 

3.  To  enable  persons  devoid  of  fortune,  but  who  are  honest 
and  laborious,  to  form  part  of  the  association  by  granting  them 
facilities  for  paying  up  their  shares  in  the  capital  stock  by 
means  of  very  small  weekly  instalments ; 

4.  To  secure  the  practice  of  the  Christian  and  social  virtues 
that  mark  the  good  citizen,  the  honest,  laborious  and  honor- 
able worker,  by  exacting  above  all  moral  warranties  of  the 
highest  order  from  the  shareholders  who  borrow  from  the 
association; 

5.  To  combat  usury  by  means  of  co-operation,  by  providing 
all  who  are  deserving  of  the  same,  through'  their  fondness  for 
work,  their  skill  and  the  integrity  of  their  conduct,  with  the 
moneys  they  require  for  carrying  on  their  business  or  occupa- 
tion, thereby  making  them  independent  of  lenders  who  levy 


24  Co-operative  Banking  in  Quebec. 

exorbitant  commission  or  interest,  or  of  those  who  impose  too 
onerous  conditions  in  connection  with  credit ; 

6.  To  foster  the  spirit  of  enterprise  and  promote  local  works, 
whether  of  an  industrial  or  agricultural  character,  by  the  pru- 
dent use  of  the  savings  effected  within  the  district  covered  by 
the  association's  operations ; 

7.  To  spread  amongst  its  members  a  practical  knowledge  of 
the  elementary  principles  of  economic  science, 

8.  To  teach  them  respect  for  their  engagements,  and  also 
the  advantages  inevitably  derived  by  those  who  faithfully  fulfil 
the  obligations  they  have  undertaken ; 

9.  To  create  and  foster  mutual  confidence  between  sharehold- 
ers by  means  of  economic  relations  based  on  the  security  of 
warranties  of  a  high  character,  inasmuch  as  they  are  founded, 
in  a  very  great  measure,  on  morality,  honesty,  order,  love  of 
work  and  prudence ; 

10.  To  gradually  procure  them — by  persevering  efforts  to- 
wards secring  economy  and  consequently  a  just  measure  of 
credit — that  economic  independence  which  inspires  and  fosters 
the  feeling  of  personal  dignity  and  convinces  one  of  the  need 
of  relying  above  all  upon  oneself  to  improve  one's  position 
and  raise  oneself  in  the  social  scale. 

The  language  may  be  a  little  stilted,  and  the  sentiment  savor 
of  being  somewhat  overdone ;  but  one  has  only  to  come  into 
actual  contact  with  the  enthusiastic  founder  and  president  of 
the  People's  Bank  of  Levis  to  feel  that  the  language  accurately 
embodies  the  man,  not.  only  in  his  sentiment,  but  also  in  his 
endeavors  to  bring  his  ideals  to  a  practical  realization. 

In  the  matter  of  saving,  Mr.  Desjardins  is  a  firm  believer  in 
the  old  adage,  "  if  you  only  look  after  the  pennies  the  pounds 
will  take  care  of  themselves."  So,  in  the  Levis  society  he  makes 
a  bid  for  the  pennies  by  ofifering  a  capital  of  shares,  each  of 
which  is  small  in  amount,  and  may  be  paid  for  in  small  weekly 
or  monthly  instalments.  On  the  basis  of  these  shares,  the  an- 
nual profits  are  distributed.  Then,  too,  the  bank  is  open  for 
the  savings  of  its  members  in  amounts  of  not  less  than  five 
cents ;  and  on  all  deposits  current  savings-bank  rates  of  interest 
'are  allowed.  A  school-children's  savings  department  is  also 
opened  in  connection  with  the  bank,  which  aims  to  encourage 
the  children  in  habits  of  thrift.     In  these  various  ways  the  co- 


A  Typical  Society.  25 

operative  credit  associations  contrive  to  build  up  a  substantial 
reservoir  of  capital  from  the  multitude  of  tiny  dribblings  of 
loose  change  which  would  otherwise,  in  all  probability,  be  lost 
in  wasteful  consumption. 

But  a  reservoir  of  capital  is  a  barren  ideal  to  work  toward 
unless  it  can  be  made  to  serve  some  purpose  in  furthering  social 
welfare.  The  aim  is  to  place  this  accumulation  of  capital  at  the 
disposal  of  all  members  who,  in  the  opinion  of  the  society,  can 
use  it  honorably  in  productive  enterprise.  This  supervision  of 
the  application  of  the  funds  of  the  association  is  always  insisted 
upon ;  and  every  member  who  applies  for  a  loan  must  state 
clearly  the  use  to  which  he  intends  to  put  it.  Any  breach  of 
confidence  in  this  regard  is  considered  sufficient  grounds  for 
the  expulsion  of  a  member.  This  rule  of  the  association  may, 
at  first  sight,  appear  very  arbitrary ;  but  in  practice  it  has 
proven  one  of  the  strongest  educational  stimuli  in  connection 
with  the  institution.  Public  opinion  is  at  all  times  a  powerful 
incentive  to  excellence ;  and  it  is  especially  so  where  the  public 
is  so  much  interested  in  each  of  its  members  as  is  the  case  in 
co-operative  credit  societies.  Feeling  himself  to  be  under  the 
critical  eyes  of  his  fellows,  each  associate  is  spurred  to  a  dis- 
crimination between  the  sound  and  the  shaky  business  enter- 
prise ;  so  that  a  refusal  to  grant  a  loan  on  this  ground  is 
comparatively  rare. 

Nor  does  the  educational  value  of  the  society  end  here.  There 
is,  first  of  all,  the  aim  to  inculcate  a  true  self-reliance  in  busi- 
ness, such  as  can  only  be  attained  on  the  basis  of  economic 
independence.  But  it  must  be  economic  independence  of  such 
a  type  as  goes  hand  in  hand  with  the  sense  of  social  solidarity 
which  makes  each  member  firm  in  upholding  fairness  and  honor 
in  the  management  and  use  of  the  common  funds.  In  this  way, 
the  associations  take  their  place  as  builders  of  character,  and 
of  just  the  sort  of  character  which  is  coming  more  and  more 
to  be  needed  in  modern  industrial  society.  The  idealism  of  the 
article  quoted  above  may  possibly  take  us  into  an  atmosphere 
which  feels  too  rare  for  ordinary  economic  activity  to  thrive  in. 
But  a  gentle  dash  of  such  idealism  thrown  into  the  management 


26  Co-operative  Banking  in  Quebec. 

of  that  conscienceless  immortal  created  under  corporation  law 
would  certainly  be  a  boon  to  the  rest  of  society.  The  capacity 
to  mulct  the  public,  to  evade,  twist  or  mold  legislation,  regard- 
less of  the  general  social  weal,  places  a  man's  services  at  a 
premium  as  a  member  of  the  average  board  of  directors.  And 
so  it  is  refreshing  to  find  a  business  organization  of  the  import- 
ance of  the  Levis  People's  Bank  trying  to  achieve  success  under 
the  guidance  of  such  principles. 

One  thing  that  brings  success  within  the  range  of  possibility, 
under  such  conditions,  is  the  care  exercised  in  the  selection  of 
the  membership.  It  is  not  an  organization  of  capitalists  in  the 
ordinary  sense  of  the  term.  In  fact,  the  amount  of  capital  a 
prospective  member  is  likely  to  be  able  to  invest  in  the  stock  of 
the  association  is  about  the  last  thing  to  be  considered  in  an 
application  for  membership.  Each  application  must  come 
before  the  Council  of  Administration  for  approval,  and  the 
chief  assets  which  are  passed  in  review  are  those  which  are 
woven  into  the  warp  and  woof  of  the  character  and  reputation 
of  the  prospective  member.  As  article  nine  puts  it,  "  he  must 
be  honest,  punctual  in  his  payments,  sober  and  of  good  habits, 
industrious  and  laborious." 

In  order  that  these  character  assets  may  be  justly  estimated, 
it  is  necessary  that  the  applicant  be  known  to  the  council  of 
administration,  or  to  some  other  shareholders  who  may  vouch 
for  his  integrity.  This  intimate  knowledge  of  each  other  by 
the  members  of  the  society  is  secured  by  the  Quebec  Syndi- 
cates Act  through  the  limitation  of  the  field  from  which 
member?  may  be  received  to  one  electrol  district;  although 
shareholders  who  change  their  place  of  residence  are  not  re- 
quired to  resign  their  membership.  Thus,  following  the  prece- 
dent of  European  country  banks,  mutual  acquaintance  and 
unquestioned  integrity  form  the  sine  qua  non  of  admission  to 
the  association.  To  be  eligible  for  membership  comes  to  be  a 
badge  of  honorable  citizenship,  a  distinction  to  be  prized  as  a 
sort  of  semi-public  recognition  of  personal  worth. 

Moreover,  there  is  a  continuous  incentive  to  maintain  the 
reputation    which    secured    admission    to    membership.      Any 


A  Typical  Society.  27 

breach  of  faith,  or  the  subsequent  manifestation  of  any  of  the 
quahties  or  actions  which  would  have  debarred  an  appHcant  in 
the  first  instance,  furnish  sufficient  grounds  for  expulsion  from 
the  association.  A  member  may  also  be  expelled  if  he  becomes 
bankrupt  or  insolvent,  or  should  he  in  any  way  abuse  the  privi- 
leges of  the  society  through  any  violation  of  the  constitution  or 
by-laws. 

Having  thus  fulfilled  the  requirements  of  the  association  as 
a  man  and  as  a  citizen,  the  applicant  for  membership  will  have 
comparatively  little  difficulty  in  satisfying  the  financial  require- 
ments for  admission.  He  must  purchase  one  share  of  stock, 
the  value  of  which  in  most  of  the  Quebec  associations  in  five 
dollars.  He  must  pay  the  entrance  tax  on  his  share  of  stock, 
which  in  the  case  of  the  Levis  association  is  ten  cents  for  each 
share.  Then  he  may  pay  for  his  share  in  such  weekly  or 
monthly  instalments  as  will  suit  his  convenience.  The  members 
of  the  Levis  bank  are  permitted  to  pay  for  their  shares  at  the 
rate  of  ten  cents  a  week,  thus  allowing  almost  a  year  for  the 
payment  of  one  share.  Each  shareholder  becomes  liable  for  the 
debts  of  the  society  only  to  the  extent  of  the  amount  of  stock 
which  he  holds. 

Any  person  may  withdraw  from  membership  and  receive 
back  all  the  instalments  which  he  has  paid  on  his  shares,  by 
giving  thirty  days'  written  notice  to  the  council  of  administra- 
tion. Li  the  practice  of  the  Levis  association,  even  this  thirty 
days'  notice  has  been  waived,  and  a  shareholder  may  at  any 
time  receive  cash  for  his  stock.  In  the  opinion  of  the  members 
of  the  council  this  policy  has  more  than  ofifset  any  possible 
inconvenience  which  might  arise  by  the  absolute  confidence  in 
the  association  which  it  has  inspired.  The  entrance  fees  on  all 
shares  are  put  into  the  reserve  fund,  and  are  not  refunded  when 
members  withdraw  from  the  society. 

In  an  analysis  of  the  operations  of  the  association,  one  of  the 
first  things  to  be  noticed  is  the  fact  that  the  co-operative  banks 
of  Quebec  confine  their  business  almost  entirely  to  their  own 
membership.  Loans  and  discounts  are  granted  only  to  mem- 
bers ;  and,  stranger  still,  as  it  must  seem  to  the  student  of  co- 


28  Co-operative  Banking  in  Quebec. 

operative  banking  in  Europe,  it  is  from  members  alone  that 
savings  and  other  deposits  are  received.  Three  general  excep- 
tions to  the  rule  confining  the  business  of  the  association  to  the 
membership  may  be  noted.  In  case  more  funds  are  required  in 
the  regular  business  of  the  society  than  it  receives  from  its 
members,  it  may  contract  for  loans  from  outsiders.  Again,  the 
resources  of  the  reserve  and  provident  funds  may  be  invested 
at  the  discretion  of  the  council  of  administration  in  such  sound 
business  enterprises  as  seem  likely  to  secure  the  greatest  advan- 
tage to  the  association.  All  speculation  in  stocks  or  other 
doubtful  investments  are  forbidden  by  special  constitutional 
provision.  In  addition  to  the  two  cases  mentioned,  we  may 
notice  that  a  good  part  of  the  working  surplus  of  the  society  is 
usually  kept  on  deposit  in  one  of  the  regular  chartered  banks. 

But,  apart  from  these  three  classes  of  transactions,  the  busi- 
ness of  the  association  is  confined  strictly  to  the  membership. 
This  policy  stands  in  sharp  contrast  to  that  of  many  of  the  town 
banks  of  Europe,  where,  as  in  Italy  and  Germany,  the  co-opera- 
tive institutions  often  enter  into  active  competition  with  the 
regular  banks  in  doing  the  ordinary  banking  business  of  the 
city.  But  with  a  strictly  limited  liability,  such  as  the  members 
of  the  Quebec  associations  enjoy,  and  with  a  share  capital  sub- 
ject to  withdrawal  at  any  time,  resulting  in  a  variable  capital 
and  a  variable  membership,  we  can  readily  see  that  it  was 
necessary  to  confine  the  regular  business  strictly  to  the  members 
of  the  society.  Nevertheless,  with  shares  withdrawable  almost 
at  pleasure,  and  the  membership  available  to  every  honest  indi- 
vidual on  such  easy  terms,  and  since  the  capital  invested  in 
shares  is  practically  certain  of  earning  a  somewhat  higher  rate 
than  is  paid  on  deposits,  we  can  scarcely  see  why  the  limitation 
of  business  to  shareholders  need  be  any  handicap  to  the  pros- 
perity and  usefulness  of  the  association. 

The   great   authority   on   co-operative   banking,    Henry   W. 

Wolfif,  claims  that,  although  the  dealings  of  societies  should  be 

with  members  only,  the  counters  of  co-operative  banks  should 

be  open  to  deposits  from  all  the  world. ^     Still,  he  insists  that 

^Henry  W.  Wolff,  Co-operative  Banking,  64. 


A  Typical  Society.  29 


these  banks  should  remain  the  humble  servants  of  the  poorer 
classes ;  and  regrets  the  capitalistic  tendencies  of  many  of  the 
European  associations,  where,  as  in  Lombardy,  they  are  doing 
three-fourths  of  all  the  banking  business.^  Now,  if  democracy 
of  membership  combined  with  the  greatest  possible  range  of 
service  is  the  ideal,  we  can  hardly  conceive  of  a  more  effective 
method  of  attaining  that  end  than  the  policy  pursued  by  the 
Desjardins  type  of  co-operative  bank. 

The  first  concern  of  the  association  is  to  raise  capital  in  order 
to  be  able  to  assist  its  members  with  loans  and  advances.  The 
Raift'eisen  societies,  as  we  have  seen,  relied  chiefly  upon  pledg- 
ing the  unlimited  liability  of  every  member  as  security  for  the 
funds  which  it  secured  from  outside  sources.  In  this  way  it 
could  obtain  funds  which  it  cotild  re-loan  to  its  members  at 
reasonable  rates  of  interest.  But  in  a  thrifty  French  Canadian 
community  Mr.  Desjardins  felt  that  a  proper  encouragement  of 
saving  would  result  in  almost  all  the  working  capital  required. 
So  he  adopted  two  methods  of  promoting  thrift,  the  selling  of 
shares,  and  the  receiving  of  deposits.  The  share  capital  was 
designed  to  furnish  the  more  stable  portion  of  the  association's 
funds.  This  method  appeals  to  those  seeking  a  more  or  less 
permanent  investment  for  their  savings.  It  is  encouraged  by  a 
somewhat  higher  rate  of  interest  than  can  be  had  in  the  ordi- 
nary savings  bank.  But,  besides  this  demand  for  a  permanent 
investment,  there  is  always  a  considerable  amount  of  money 
afloat  in  a  community  which  cannot  be  tied  up  for  any  great 
length  of  time.  Such  funds  are  kept  for  the  running  expenses 
of  households,  for  the  payment  of  rents,  insurance  premiums, 
lodge  dues,  etc.,  as  they  mature.  By  offering  a  low  rate  of 
interest,  the  association  can  have  the  use  of  considerable 
amounts  of  this  floating  capital  as  deposits,  payable  on  demand 
or  at  the  end  of  a  period  agreed  upon.  Greater  care  must  be 
exercised  in  the  use  of  these  funds  by  the  society;  but,  never- 
theless, they  can  be  used  in  making  all  sorts  of  short  time  loans, 
and  a  little  experience  enables  the  management  to  handle  them 
without  danger  and  with  great  advantage  to  the  society.  Each 
2Ibid..  285. 


30  Co-operative  Banking  in  Quebec. 

member  making  a  deposit  is  given  a  pass  book  in  which  each 
withdrawal  or  new  deposit  is  entered,  just  as  in  ordinary 
banking. 

Thus  far  in  their  experience  the  funds  derived  from  these 
two  sources  have  been  sufficient  to  meet  all  the  demands  of  the 
members  for  loans. 

A  restriction  has  been  placed  upon  the  amount  of  funds 
available  from  share  capital  by  limiting  the  amount  of  stock 
which  a  member  may  hold.  This  restriction  is  a  sort  of  safe- 
guard in  the  interest  of  equality  and  democracy  within  the  asso- 
ciation. Each  member,  it  is  true,  has  only  one  vote,  no  matter 
what  his  holdings  of  stock  may  be.  But  still  it  is  thought  that 
if  it  were  possible  for  one  man  to  hold  an  unlimited  amount  of 
stock,  he  might,  by  his  prestige,  or  by  the  threat  of  the  with- 
drawal of  his  capital,  be  able  to  exercise  an  influence  upon  the 
policy  of  the  association  which  might  be  detrimental  to  the 
interest  of  a  majority  of  the  shareholders.  The  limit  was 
started  in  the  Levis  society  at  $125,  or  twenty-five  shares  of 
stock.  The  amount  permitted  to  each  associate  was  later  raised 
to  $250,  then  to  $500,  and  stands  at  present  at  $1000.  Deposits 
with  the  society  are  usually  for  smaller  amounts,  and  no  limit 
has  thus  far  been  placed  on  the  amount  which  a  member  may 
place  on  deposit. 

Out  of  the  funds  so  raised,  loans  and  advances  are  made  to 
the  members  of  the  association.  The  granting  of  loans  is  at 
the  discretion  of  the  committee  on  credit.  The  loan  may  be 
granted  on  the  simple  note  or  acknowledgment  of  the  borrow- 
ing shareholder ;  or  the  committee  may  decide  that  the  loan 
shall  i3e  guaranteed  by  one  or  two  other  solvent  members.  Much 
will  depend  upon  the  amount  of  the  loan,  and  on  the  standing 
of  the  borrower.  But,  as  article  fifty-one  says,  "  the  committee 
must,  above  all,  consider  and  obtain  accurate  information  with 
regard  to  the  honor,  the  spirit  of  order,  the  activity,  honesty 
and  ability  of  the  borrower,  for  such  are  the  chief  warranties 
exacted  by  the  association." 

In  all  cases  the  borrower  must  state  clearly  in  his  application 
the  purpose  for  which  he  wishes  the  loan.     If  that  purpose  is 


A  Typical  Society.  31 

not  in  conformity  with  the  aim  of  the  association  to  encourage 
the  promotion  of  productive  enterprise,  the  advance  is  straight- 
way refused.  "  You  see,"  said  President  Desjardins  in  discuss- 
ing this  matter  with  the  writer,  ''  if  we  were  to  attempt  to 
finance  every  frivolous  adventure  requiring  capital,  the  objects 
of  our  society  would  be  completely  frustrated.  For  example, 
just  to  show  you  what  I  mean,  a  young  man  came  to  me  one 
morning  and  told  me  he  would  like  to  have  a  loan  of  fifteen 
dollars.  '  Very  well,'  I  said,  *  state  your  reason  for  wanting  the 
money  and  I  will  bring  your  application  before  the  committee 
at  noon.'  He  hesitated,  and,  on  my  repeating  the  request,  ad- 
mitted that  he  was  contemplating  a  pleasure-trip  to  visit  some 
friends  and  was  a  little  short  of  cash.  '  In  that  case,'  I  replied, 
'  it  would  be  absolutely  useless  for  me  to  bring' your  application 
before  the  committee,  as  to  grant  such  a  loan  would  be  a  viola- 
tion of  our  by-laws,  which  are  equally  binding  on  all  the  mem- 
bers of  our  society.'  And  yet  the  young  man's  credit  was 
perfectly  good.  His  purpose  was  simply  outside  the  scope  of 
the  association." 

In  advancing  credit  for  legitimate  purposes,  the  advantage 
and  convenience  of  the  borrower  is  always  given  the  most  care- 
ful consideration,  both  as  to  the  manner  and  time  of  repayment, 
and  as  to  the  rate  of  interest  charged.  The  instalment  plan  of 
repayment  is  always  encouraged  where  it  is  feasible.  The  in- 
stalments may  be  placed  on  deposit  and  draw  interest  until 
enough  has  been  accumulated  to  pay  the  debt  in  full;  or  by 
special  arrangement,  the  instalments  may  be  applied  directly  in 
reducing  the  debt,  interest  being  charged  only  on  the  unpaid 
portions  for  the  time  which  elapses  from  the  granting  of  the 
loan  until  each  instalment  is  repaid.  In  the  matter  of  repay- 
ment, the  widest  latitude  is  permitted.  In  all  cases,  however, 
it  is  considered  a  point  of  honor  that  the  borrower  live  strictly 
up  to  the  terms  of  the  agreement  he  enters  into  at  the  time  he 
receives  the  loan. 

Take  this  example  from  the  evidence  of  Mr.  Desjardins  be- 
fore the  committee  appointed  by  the  Dominion  Parliament,  as 
an  illustration  of  the  terms  wdiich  a  borrower  may  make  with 


32  Co-operative  Banking  in  Quebec. 


his  co-operative  bank.  '*A  member  of  our  society  came  about 
the  month  of  July  last  and  said :  *  I  expect  a  payment  due  me 
of  $150.  I  counted  on  it  to  pay  the  insurance  premium  on  my 
life,  but  the  man  who  owes  me  the  money  has  not  come.  The 
premium  must  be  paid  to-morrow,  and  I  have  not  a  red  cent  in 
my  possession.  I  want  you  to  let  me  have  $150  in  order  to  pay 
my  premium  when  due.  What  are  the  conditions  ?  '  I  said, 
*  you  have  the  option  of  either  paying  seven  per  cent,  in  ad- 
vance, or  eight  per  cent,  with  the  privilege  of  then  paying  only 
for  the  time  you  keep  the  money,  or  any  part  thereof.'  He  said 
to  me,  *  I  prefer  the  eight  per  cent,  rate  because  you  might  have 
the  money  to-morrow  or  to-night.'  He  came  the  next  morning 
and  got  $150,  after  I  had  submitted  his  demand  to  the  board 
of  credit.  Five  days  afterwards  he  came  back,  and  he  had  the 
money  from  the  man  who  owed  him.  He  paid  his  premium  and 
said,  '  now,  according  to  the  conditions,  how  much  do  I  owe 
you?  '  I  think  it  was  twenty-three  or  twenty- four  cents  for  the 
whole  amount."^ 

In  making  loans  and  advances,  the  aim  is  to  benefit  the  great- 
est possible  number  of  members.  In  order  to  do  this,  a  number 
of  small  loans  are  always  given  the  preference,other  things  being 
equal,  over  one  large  loan  for  the  same  amount.  In  fact,  the 
opportunity  to  place  a  large  loan  on  favorable  conditions  must 
frequently  be  rejected  on  account  of  the  demand  for  credit  in 
small  amounts.  In  justification  of  this  policy,  it  is  urged  that 
the  member  who  is  in  a  position  to  use  profitably  a  large  amount 
of  credit  is  usually  so  situated  as  to  be  able  to  get  it  on  reason- 
able terms  from  one  of  the  chartered  banks,  or  from  some  other 
institution  -dealing  in  credit.  The  poorer  member,  on  the  other 
hand,  could,  in  all  likelihood,  oflfer  no  security  which  such 
dealers  in  credit  would  accept. 

Thus,  '*  the  greatest  good  to  the  greatest  number  "  is  the  rule 
which  determines  the  distribution  of  credit  to  the  members  of 
the  society.  First  of  all,  the  general  meeting  fixes  annually  the 
amount  which  may  be  loaned  to  any  individual  shareholder, 
just  as  it  fixes  the  amount  of  stock  which  any  member  may 
^Report  of  Committee  on  Bill  No.  2,  1507,  page  13. 


A  Typical  Society.  33 


hold.  This  is  to  prevent  the  possibihty  of  finding  the  loanable 
funds  of  the  association  concentrated  in  the  hands  of  a  small 
number  of  members.  Below  the  limit  set  by  the  general  meet- 
ing the  committee  on  credit  exercise  their  own  discretion  in 
advancing  loans.  They  are  supposed  to  be  acquainted  with  the 
financial  standing  and  personal  character  of  every  member  of 
the  association,  and  they  decide  each  application  for  a  loan  on 
its  own  merits. 

In  actual  practice,  however,  the  method  is  not  so  cumbersome 
as  it  appears  at  first  sight.  The  committee  usually  has  prepared 
a  private  list  of  all  the  members,  placing  opposite  each  name 
the  amount  of  credit  he  should  be  permitted  to  draw.  This  list 
is  placed  in  the  hands  of  the  president  or  manager,  who  is 
thoroughly  acquainted  with  the  purposes  for  which  it  is  per- 
missible to  make  advances ;  so  that  unless  there  are  some 
unusual  circumstances  to  be  considered,  he  may  grant  the  loan 
without  a  special  appeal  to  the  committee. 

In  this  way  the  credit  and  loan  side  of  co-operative  banking 
is  managed  in  Quebec ;  and  the  general  policy  in  this  respect  is 
much  like  that  of  the  European  associations. 

From  the  foregoing  account  of  co-operative  credit  operations 
it-  is  apparent  that  these  societies  offer  decided  advantages  from 
the  standpoint  of  the  borrower.  At  all  times  the  Quebec  Peo- 
ple's banks  have  steadfastly  adhered  to  the  policy  of  giving  the 
maximum  amount  of  service  consistent  with  safety.  Never- 
theless, in  the  course  of  the  year's  business  substantial  profits 
accumulate  in  the  treasuries  of  the  associations.  During  the 
fiscal  year  ending  November  30,  1909,  for  example,  the  profits 
of  the  Levis  society  were  $4,861.72.  For  the  preceding  year 
they  amounted  to  $4,000.36.  Now  the  question  arises,  how  are 
these  profits  distributed  ? 

First  of  all  have  to  be  met  the  running  expenses  of  the  soci- 
ety. In  the  French  Canadian  associations  these  are  invariably 
light.  We  have  already  noticed  this  in  connection  with  the 
early  history  of  the  People's  Bank  of  Levis.  The  only  official 
on  a  regular  salary  is  the  business  manager,  and  he  is  paid  ac- 
cording to  the  time  he  devotes  to  the  work  of  the  society.  Some 


34  Co-operative  Banking  in  Quebec. 

one  is  chosen  as  manager  who  can  conveniently  give  the  neces- 
sary time  to  the  affairs  of  the  bank  without  interfering  too 
much  with  his  regular  occupation.  At  Levis,  for  example,  the 
present  manager  is  a  justice  of  the  peace, — a  much  more  im- 
portant official  in  French  than  in  English-speaking  communi- 
ties. Still,  he  manages  the  business  of  the  Levis  People's  Bank 
without  much  difficulty  along  with  his  professional  duties,  and 
was  receiving  last  year  twenty  dollars  a  month  for  his  services. 
Other  expenses,  such  as  printing,  lighting,  heating,  and  any 
travelling  expenses  which  officials  may  be  allowed  in  accord- 
ance with  the  constitution  do  not  amount  to  a  large  sum  in  the 
aggregate.  So  the  total  general  expenditure  for  last  year, 
including  the  manager's  salary,  amounted  to  only  $463.45 ; 
which  is  a  very  small  outlay  compared  with  the  service  rendered 
by  the  association.- 

After  payment  of  the  general  costs  of  operation  comes  the 
claim  for  interest  on  deposits  of  which  the  society  has  had  the 
use.  As  we  pointed  out  above,  the  interest  varies  somewhat 
with  the  nature  of  the  account,  depending  on  the  length  of  time 
for  which  the  association  can  depend  upon  the  use  of  the  funds. 
But,  in  any  case,  the  rates  average  about  the  same  as  those 
allowed  by  other  savings  banks  in  the  neighborhood. 

When  these  necessary  expenditures  have  been  met,  the  next 
important  consideration  is  to  provide  a  sound  financial  basis  for 
the  association.  Mr.  Wolff  thinks  this  is  best  secured,  in  the 
village  type  of  society,  by  unlimited  liability.  In  fact,  he  deems 
this  form  of  liability  indispensable  to  the  security  of  the  coun- 
try bank.*  But  what  the  Raiffeisen  bank  attains  by  means  of 
unlimited  liability,  and  what  some  other  European  models 
secure  by  restricting  the  withdrawal  of  share  capital,  the  French 
Canadian  associations  aim  to  provide  through  a  strong  reserve  or 
rest  fund.  This  is  made  up  of  the  entrance  fees  on  each  share 
of  stock  issued,  together  with  an  assessment  of  twenty  per  cent, 
of  the  net  profits  of  each  year,  until  the  fund  reaches  a  maxi- 
mum of  double  the  amount  distributed  in  profits  on  the  paid  up 
stock  of  any  year.  The  reserve  fund  remains  the  undivided 
^op.  cit.,  46. 


A  Typical  Society,  35 


property  of  the  society.  It  is  invested  by  the  council  of  admin- 
istration in  such  ways  as  are  attended  with  a  minimum  of  risk; 
and  any  poHcy  which  could  possibly  endanger  the  reserve  is 
absolutely  unconstitutional.  It  can  be  used  to  meet  only  such 
extraordinary  losses  as  are  beyond  the  other  resources  of  the 
association.  For  example,  the  Neuwied  Central  Bank  of  Ger- 
many at  one  time  lost  so  heavily  through  its  liberality  in  fi- 
nancing all  sorts  of  co-operative  schemes,  that  it  was  only  able 
to  save  itself  from  bankruptcy  by  cancelling  dividends  and 
raiding  its  reserve.^  Such  a  predicament  could  not  occur  under 
the  conditions  prescribed  by  the  Quebec  Syndicates  Act ;  and 
yet  the  fact  that  there  is  a  strong  undivided  fund  waiting  to 
meet  any  emergency  which  might  threaten  the  existence  of  the 
society  gives  a  sense  of  security  to  the  entire  membership,  which 
is  a  rtsong  influence  in  promoting  the  prosperit}'  of  the  asso- 
ciation. 

As  a  sort  of  outer  bulwark,  protecting  the  reserve  citadel,  is 
the  Provident  Fund,  designed  to  meet  the  first  onslaught  of  any 
disaster  which  might  threaten  the  stability  of  the  credit  union. 
It  is  constituted  by  means  of  a  ten  per  cent,  assessment  on  the 
net  profits  of  each  year  until  the  fund  shall  attain  a  maximum 
of  one-half  of  the  yearly  profits  ("boni")  distributed  on  the 
paid  up  stock. 

But,  according  to  the  constitution,  the  assessments  for  both 
the  reserve  or  provident  funds  may  be  increased  or  decreased 
by  vote  of  the  general  meeting.  We  notice,  according  to  the 
last  annual  report,  that  these  funds  are  in  such  satisfactory  con- 
dition as  to  warrant  the  manager's  recommending  to  the  asso- 
ciation a  reduction  for  the  coming  year  in  the  percentage  to  be 
set  aside  for  each  of  them  from  the  net  profits.  He  suggests 
that  fifteen  and  five  per  cent.,  respectively,  will  provide  ample 
addition  to  the  reserve  and  provident  funds  for  the  next  fiscal 
year.  In  the  history  of  the  Levis  society  up  to  the  present  time 
there  has  never  been  any  occasion  for  a  demand  upon  either  of 
these  funds. 

After  these  various  claims  have  been  met  comes  the  distri- 
sHenry  W.  Wolff,  op.  cit.,  172-3. 


36  Co-operative  Banking  in  Quebec. 

bution  of  dividends  or  ''boni"  on  the  paid  up  stock.  Those 
shares  which  have  not  been  paid  up  during  the  entire  year  re- 
ceive dividends  in  proportion  to  the  time  which  has  elapsed 
since  the  last  instalment  was  paid.  The  aim  is  not  to  pay  very 
high  profits,  but  only  such  as  shall  ensure  to  those  who  invest 
in  shares  a  little  better  return  on  their  savings  than  if  they  had 
placed  them  on  deposit.  The  constitution  provides  that,  in  case 
the  profits  of  any  year,  after  deducting  the  expense  of  opera- 
tion, the  interest  on  deposits,  and  the  regular  assessments  for 
the  reserve  fund,  are  insufficient  to  pay  a  dividend  equal,  or 
nearly  so,  to  the  average  for  the  three  years  preceding,  the  gen- 
eral meeting  may  order  that  the  difference  be  made  up  out  of 
the  provident  fund.  This  reduction,  however,  must  be  made 
up  again  as  soon  as  the  condition  of  the  society  will  permit. 

The  following  items  from  the  Ninth  General*  Report  of  the 
Levis  association  will  serve  to  illustrate  what  has  been  said  re- 
garding the  distribution  of  profits : 

Profits  for  the  year  ending  Nov.  30,  1909 $4,861  72 

General  expenses  for  the  year 463  45 

Interest  on  savings  deposits  for  the  year 592  53 

Leaving  a  net  balance  of $3,805  74 

Reserve  fund  standing  from  last  year $4,101  87 

Entrance  fees  for  current  year 283  35 

Twenty  per  cent,  of  net  profits 761  15 

Present  reserve  fund  .- $5,146  37 

Provident  fund  standing  from  last  year $    912  59 

Ten  per  cent,  of  net  profits 380  57 

Present  provident  fund  $1,293  16 

Then,  drawing  on  the  surplus  to  the  extent  of  $46.86,  a  divi- 
dend of  four  and  a  half  per  cent,  was  declared  on  the  paid  up- 
stock  for  the  year,  making  a  total  of  $2,710.88  distributed  in 
**boni"  on  the  12,953  shares  of  stock  which  were  paid  up  on 
time  to  participate  in  the  yearly  distribution  of  profits.     Sum- 


A  Typical  Society.  37 


ming  up  the  reserves  as  they  stand  at  the  end  of  the  year,  we 
have: 

Reserve  fund $5,146  37 

Provident  fund  1,293  16 

Undivided  surplus  337  78 

Total  "  patrimoine  "   $6,777  31 

We  come  now  to  a  more  careful  examination  of  the  admin- 
istration and  management  of  these  societies.  Throughout  the 
constitution  and  by-laws  of  the  Quebec  associations  every 
possible  precaution  seems  to  have  been  taken  to  preserve  the 
democratic  nature  of  the  institutions.  We  have  already  had 
occasion  to  notice  that  one  man  can  have  but  one  vote  in  the 
general  meeting,  no  matter  what  his  holdings  of  stock  may  be; 
we  have  seen  that  the  amount  of  stock  which  one  man  may 
hold  is  strictly  limited  by  the  general  meeting;  and  that  the 
amount  which  any  member  may  receive  in  loans  is  also  limited 
by  the  same  authority.  •  Further,  the  general  meeting,  in  which 
each  member  has  an  equal  voting  power,  and  in  which  none 
save  corporations  which  have  been  admitted  to  membership 
may  vote  by  proxy,  is  the  chief  authority  and  final  court  of 
appeal  in  all  that  pertains  to  the  management  of  the  associa- 
tion. At  the  annual  meetings  are  chosen  the  representatives  of 
the  shareholders  to  whom  is  entrusted  the  administration  and 
supervision  of  the  affairs  of  the  society.  These  constitute:  1^ 
a  council  of  administration;  2,  a  committee  on  credit;  3,  a 
committee  of  supervision. 

The  council  of  administration  shall  consist,  according  to  the 
constitution,  of  nine  members  chosen  from  among  the  share- 
holders by  vote  of  the  general  meeting.  The  number,  however, 
may  be  changed  in  case  the  membership  so  elects.  They  are  to 
hold  office  for  two  years,  five  retiring  by  lot  at  the  end  of  the 
first  year,  and  the  term  of  the  remaining  four  expiring  at  the 
end  of  the  second  year,  and  so  on.  At  its  first  sitting  after  the 
general  meeting  the  council  of  administration  must  choose  a 
president,  a  vice-president  and  a  secretary,  who  constitute  the 


38  Co-operative  Banking  in  Quebec. 

executive  of  the  board,  and  besides,  act  as  president,  vice-presi- 
dent and  secretary  of  the  association. 

The  most  extensive  powers  are  vested  in  the  council  of  ad- 
ministration. The  members,  known  as  directors,  meet  as  often 
as  necessary  in  the  interests  of  the  association.  They  control 
the  admission  of  new  members,  and  determine  the  conditions 
upon  which  stock  may  be  transferred  or  withdrawn ;  they  ap- 
point or  remove  employees,  fix  their  remuneration  and  deter- 
mine their  duties ;  they  choose  the  salaried  manager  who  has 
access  to  their  meetings,  keeps  the  books,  signs  documents  as 
representative  of  the  society,  and,  under  the  supervision  of  the 
council  and  committees,  conducts  the  business  of  the  bank;  they 
call  special  meetings  of  the  entire  membership  when  they  think 
necessary;  and,  in  brief,  ''  they  take  all  the  measures  they  deem 
advisable  in  the  interest  of  the  association  not  within  the  juris- 
diction of  the  general  meeting,  or  not  inconsistent  with  the 
general  by-laws  or  law."*' 

The  committee  on  credit  consists  of  the  president  and  four 
shareholders  appointed  at  the  general  meeting.  These  four 
members  are  elected  for  three  years,  two  retiring  each  alternate 
year.  Three  of  them  must  be  present  in  order  to  render  a  valid 
decision.  They  represent  the  association  in  determining  the 
credit  which  may  be  allowed  to  each  member,  and  no  applica- 
tion for  a  loan  may  be  complied  with  until  this  committee  has 
passed  its  approval.  Nor  can  any  action  in  such  matters  be 
taken  unless  the  members  present  are  unanimous  in  their  deci- 
sion. But  in  case  they  cannot  agree  regarding  the  granting  of 
a  loan,  or  should  they  refuse  to  advance  any  credit  at  all,  the 
shareholder  concerned  may  appeal  to  the  council  of  adminis- 
tration. The  council  hears  the  evidence  submitted  by  the  mem- 
"bers  of  the  committee  on  credit,  and  also  the  case  of  the 
interested  shareholder;  after  which  the  case  is  decided  defi- 
nitively by  a  majority  vote  of  the  board  of  directors. 

The  aim  in  selecting  this  committee  is  to  choose  the"  most 
widely  acquainted,  level-headed  members  of  the  community. 
They  must  know,  or  make   themselves  acquainted  with,  the 

^Constitution  of  the  Peoples'  Bank  of  Levis,  Article  69,  Clause  10. 


A  Typical  Society.  39 

financial  standing  and  moral  character  of  every  borrower ;  they 
must  be  men  in  whose  judgment  the  association  has  the  fullest 
confidence;  and  they  must  be  above  the  suspicion  of  acting 
from  jealousy  or  any  purely  selfish  motive.  As  a  safeguard 
against  selfishness  or  partiality,  no  member  of  the  committee 
on  credit  may  borrow  from  the  association,  or  become  surety 
for  any  loan  or  advance  during  his  term  of  office.  They  have 
power  to  demand  the  fullest  information  regarding  all  matters 
concerning  the  credit  of  the  association ;  and  under  their  direc- 
tion all  the  regular  financial  statements  are  drawn  up. 

At  the  annual  meeting  another  committee  of  three  share- 
holders is  also  selected.  These  have  been  called,  for  want  of 
a  more  adequate  English  term,  the  committee  of  supervision. 
They  must  not  hold  any  other  office  or  salaried  position  in  the 
association  during  their  term  as  members  of  this  committee. 
They  are  elected  for  one  year,  and  are  re-eligible.  They  form 
a  permanent  board  of  supervision,  audit  and  general  criticism^ 
which  watches  over  all  the  operations  of  the  society.  They 
must  frequently  check  the  cash,  and  examine  securities  and  in- 
vestments ;  they  see  to  the  enforcement  of  the  by-laws,  and  the 
carrying  out  of  the  regulations  and  decisions  of  the  general 
meeting;  they  may  control  the  decision  of  the  committee  on 
credit  regarding  loans  and  renewals ;  they  have  access  to  all 
documents ;  and  may  demand  accurate  information  regarding 
every  transaction  in  connection  with  the  operations  of  the  asso- 
ciation. As  advisers  and  critics,  all  other  officials  must  hearken 
to  their  council.  Where  they  find  anything  remiss  in  the  man- 
agement of  the  society  they  must  report  their  observations  in 
writing  to  the  council  of  administration.  Should  the  council 
not  act  at  once,  or  should  they  find  any  serious  violation  of  the 
constitution,  they  may  proceed  to  call  an  emergency  meeting. 
In  the  event  of  circumstances  calling  for  extraordinary  pro- 
cedure, they  have  power  to  suspend  the  operations  of  the  asso- 
ciation entirely  until  a  meeting  of  the  shareholders  has  been 
called  to  consider  the  situation. 

Owing  to  their  authority  over  the  committee  on  credit,  the 
members  of  the  committee  of  supervision  are  placed  on  the 


40  Co-operative  Banking  in  Quebec. 

same  footing  in  the  matter  of  obtaining  credit  from  the  associa- 
tion. They  can  neither  act  as  surety  nor  receive  a  loan  during 
their  term  of  office. 

Apart  from  our  consideration  of  the  general  meeting,  the 
council  and  two  committees,  we  must  look  briefly  into  the  duties 
of  two  or  three  separate  officials.  These  are  the  president, 
vice-president,  manager  and  secretary. 

The  president  presides  over  the  general  meeting  of  the  share- 
Tiolders,  and  over  the  meetings  of  the  council  of  administration. 
He  decides  points  of  order,  and  in  case  of  an  equal  division  of 
those  present  over  any  question,  he  has  the  casting  vote.  In 
case  of  his  temporary  absence  or  inability  to  act  from  any  cause 
his  place  is  taken  by  the  vice-president.  In  the  event  of  the 
resignation  or  death  of  the  president  the  vice-president  succeeds 
him  for  the  remainder  of  his  term  of  office. 

The  president  may  also  fill  the  office  of  manager,  as  is  the 
case- in  many  of  the  French  Canadian  associations.  The  man- 
ager has  charge  of  the  books  of  account,  takes  care  of  the 
securities  and  cash  belonging  to  the  society,  and  under  the  di- 
rection of  the  council  and  committees  conducts  the  business  of 
the  association.  He  must,  at  the  discretion  of  the  council  of 
administration,  furnish  security,  which  shall  be  in  the  form  of 
a  guarantee  policy  from  an  insurance  company,  upon  which  the 
society  pays  the  premium. 

As  provided  in  article  122  of  the  constitution,  "  the  secretary 
has  custody  of  the  archives  of  the  association;  he  draws  up 
minutes  of  the  general  meetings  of  the  shareholders,  and  of 
the  meetings  of  the  council  of  administration.  He  gives  com- 
munication of  the  same  at  the  meetings  of  the  association  and 
of  the  council.  He  performs  all  the  duties  connected  with  his 
office." 

On  the  basis  of  our  study  of  the  Quebec  societies,  we  are  in 
a  position  to  venture  a  few  observations  in  comparison  of  the 
French  Canadian  type  with  some  of  the  prevailing  forms  of 
European  co-operative  banks.  While  a  complete  comparison  is 
not  attempted,  a  few  of  the  outstanding  features  of  the  societies 


A  Typical  Society.  41 

will  be  emphasised  by  placing  them  alongside  of  those  developed 
in  the  different  conditions  of  the  countries  of  Europe. 

Take  first  the  Raififeisen  organization,  which  is  the  prevailing 
form  of  country  or  village  bank  in  Europe.  We  note  the  simi- 
larity in  the  general  humanitarian  purpose  of  the  two  types  of 
association,  in  the  economy  of  management,  in  the  strict  super- 
vision of  the  use  of  the  loans  granted.  But  we  have  the  un- , 
limited  liability  of  the  Raiffeisen  shareholder  as  compared  with 
the  very  limited  responsibility  of  the  member  of  the  Quebec 
societies.  Then,  we  have  Raiffeisen's  utter  disregard  of  share 
capital  as  a  means  of  accumulating  funds.  In  fact,  he  only 
tolerated  share  capital  because  the  Prussian  law,  secured  under 
the  influence  of  the  Schulze-Delitzsch  faction,  forced  it  upon 
him.  However,  the  shares  were  only  a  nominal  compliance 
with  the  law,  being  as  low  as  a  farthing  or  half-cent  a  share  in 
some  instances.'  Over  against  this  indifference  to  share  capital 
we  have  the  effective  use  of  moderate  priced  shares  by  the 
Canadian  associations.  In  Quebec  we  have  a  much  greater 
emphasis  on  the  importance  of  raising  the  funds  for  the  use 
of  the  society  among  its  own  members.  The  Raiffeisen  bank 
works  on  a  smaller  scale,  and  among  people  of  more  limited 
means  than  the  average  French  Canadian  association.  Hence, 
it  lays  more  stress  on  the  stimulation  of  enterprise  than  on 
saving.  In  order  to  secure  the  necessary  capital,  each  member 
is  pledged  to  unlimited  liability..  Often  some  rich  man  unites 
with  the  society,  and  on  the  basis  of  his  security  capital  may 
be  borrowed  on  easy  terms  to  lend  to  those  who  need  credit.^ 

If  we  now  turn  to  the  Schulze-Delitzsch  model,  the  "  town  " 
or  "  people's  bank  "  of  Europe,  we  find  other  points  of  similar- 
ity and  difference.  In  the  first  place,  we  are  struck  by  the 
greater  expenditure  in  the  operation  of  the  town  bank.  Many 
of  them,  as  we  have  noticed,  occupy  handsome  buildings  and 
employ  quite  a  staff  of  clerks  and  officials.  This  is  in  marked 
contrast  with  the  humble  Raiffeisen  societies  with  their  volun- 

^Henry  W.  Wolff,  op.  cit.,  92.    Cf.  C.  R.  Fay,  Co-operation  at  Home: 
and  Abroad,  43. 

8H.  W.  Wolff,  op.  cit.,  93. 


42  Co-operative  Banking  in  Quebec. 

tary  service ;  and  also  differs  from  the  economical  management 
of  the  Desjardins  model.  Schulze  went  on  the  assumption  that 
paid  service  is  always  best  and  cheapest  in  the  long  run. 
Raiffeisen,  working  chiefly  among  those  with  very  limited 
means,  whose  time  is  not  placed  at  a  very  high  money  value, 
disallowed  all  remuneration.  Mr.  Desjardins,  living  amidst  the 
somewhat  intermediate  conditions  of  a  French  Canadian  com- 
munity, chose  a  type  a  little  nearer  the  Raiffeisen  than  the 
Schulze  ideal  in  the  matter  of  expense.  Each  is  perhaps  best 
in  its  own  peculiar  social  environment.® 

In  his  attitude  toward  share  capital,  we  find  that  Schulze 
emphasized,  very  strongly,  saving,  thrift,  and  self-help.  These, 
he  believed,  could  best  be  promoted  by  the  selling  of  stock. 
Thus  far  he  was  in  perfect  unison  with  Mr.  Desjardins.  They 
differ,  however,  as  to  the  size  of  the  shares  to  be  used.  Schulze 
considered  that  his  object  could  be  best  attained  by  issuing  large 
shares;  while  Mr.  Desjardins  maintains  that  the  small  share  is 
most  effective.  In  the  European  town  bank  the  size  of  the 
share  varies  from  society  to  society,  but  the  minimum  is  about 
thirty  dollars. ^*^  In  Quebec  most  of  the  associations  use  a  five 
dollar  share,  and  Mr.  Desjardins  considers  this  plenty  large 
enough.  The  ordinary  man,  he  finds,  takes  a  pride  in  adding 
to  the  number  of  his  shares.  The  greater  effectiveness  of  the 
large  share  in  Europe  rests  upon  the  fact  in  the  people's  banks 
liability  was  originally,  and  is  still  largely  unlimited.  Where 
a  man  pledges  himself  to  unlimited  liability  in  order  to  obtain 
the  advantages  of  co-operative  credit,  his  object  has  been  at- 
tained by  the  purchase  of  one  share.  It  is  found  that  in  socie- 
ties of  unlimited  Hability  most  members  purchase  but  one  share. 
Hence  the  necessity  that  it  be  large  if  it  is  to  be  a  means  of 
accumulating  capital. 

Another  point  of  difference  lies  in  the  scope  of  the  business 
done.  We  find  the  people's  banks  of  Europe  in  active  compe- 
tition with  the  regular  chartered  banks.  In  Germany  the  co- 
operative bank  often  does  the  bulk  of  the  business  in  a  city. 

»Ibid.,  112. 

IOC.  R.  Fay,  op.  cit.,  22-23. 


A  Typical  Society.  43^ 


We  have  already  referred  to  the  situation  in  Lombardy,  where 
the  people's  banks  control  three-quarters  of  the  banking  busi- 
ness. In  Quebec  the  aim  is  rather  to  supplement  than  to  sup- 
plant the  regular  banks.  It  often  happens  that  members  who 
wish  large  advances  and  can  give  good  security,  are  refused 
accommodation  on  the  ground  that  the  funds  can  be  used  for 
small  loans  to  poorer  people,  while  the  rich  member  will  have 
no  difficulty  in  obtaining  credit  at  a  chartered  bank. 

When  we  come  to  consider  the  Luzzatti  or  Italian  model,  we 
find  some  points  of  closer  similarity  to  the  working  type  in 
French  Canada.  In  the  first  place,  we  have  limited  liabiUty  in 
common.  Then,  the  Quebec  societies  have  practically  adopted 
Luzzatti's  plan  of  making  shares  small  and  having  them  paid 
up  in  instalments  stretching  over  a  period  of  ten  months.  The 
Italian  shares  are  withdrawable  and  transferable  as  in  the  Cana- 
dian associations.  But  the  disposal  of  shares  is  very  strictly 
supervised  in  Canada;  while  we  find  Mr.  Wolff  deploring  the 
fact  that  the  easy  transfer  of  shares  of  some  Italian  banks  is 
absolutely  faulty  from  the  co-operative  point  of  view."  Again, 
the  counters  of  Italian  banks  are  open  to  deposits  from  all  who 
come ;  while  in  French  Canada  savings  are  received  from  mem- 
bers only.  On  the  other  hand,  both  systems  are  alike  in  being 
entirely  independent  of  government  aid.  In  this  respect  they 
differ  from  the  German,  French,  Austrian  and  Hungarian  asso- 
ciations, as  well  as  those  being  established  in  Ireland  and  India. 
In  all  of  these  countries  the  societies  have  been  more  or  less 
pampered  by  government  assistance.  The  best  authorities  on 
co-operative  banking  are  opposed  to  the  granting  of  govern- 
ment aid ;  or,  in  any  case,  maintain  that  it  should  be  only  spar- 
ingly used  as  a  step  toward  independence.  Mr.  Desjardins 
stands  for  the  Italian  policy  of  self-reliance,  and  opposes  gov- 
ernment assistance  under  all  circumstances.  He  would  be  glad 
to  have  the  Canadian  government  show  enough  interest  in  the 
movement  to  clear  the  way  by  suitable  federal  legislation;  but 
beyond  this  he  thinks  it  would  be  a  mistake  to  go. 

Again,  the  Quebec  associations  strictly  forbid  the  granting  of 

1^  Henry  W.  Wolff,  op.  cit,  66. 


44  Co-operative  Banking  in  Quebec. 

credit  to  officials  and  committee  members  who  have  anything 
to  do  with  the  handling  of  the  funds,  or  who  control  the  mak- 
ing of  loans.  Nor  are  such  persons  permitted  to  act  as  surety 
for  others  borrowing  from  the  society.  The  tendency  in 
Europe  at  the  present  time  is  toward  the  adoption  of  a  similar 
policy.  The  German  societies  have  suffered  severely  in  the  past 
through  the  granting  of  excessive  credit  to  members  of  the  con- 
trolling boards.  Many  German  and  Austrian  associations  have 
tried  to  meet  this  situation  by  the  appointment  of  a  separate 
appraising  committee  to  deal  with  loans  to  officials  and  boards. 
But  even  this  has  not  always  proven  a  sufficient  safeguard. ^^ 
The  tendency  to  favor  officials  with  unjustifiable  credit  has 
been  so  persistent  that  the  Quebec  societies  disallow  the  prac- 
tice entirely. 

We  have  already  pointed  out  the  difficulties  encountered  by 
the  Neuwied  Central  bank  as  a  result  of  financing  other  co- 
operative enterprises.  It  is  a  common  thing  for  the  local 
Raiffeisen  associations  to  act  as  purchasing  and  distributing 
agencies  for  their  members.  When  confined  strictly  to  the 
humble  country  bank,  where  the  business  is  very  small,  this 
practice  seems  to  have  resulted  in  little  harm.  But  Wolff  is 
strongly  of  the  opinion  that  co-operative  credit  associations 
should  confine  their  activity  entirely  to  the  banking  business. ^^ 
In  this  respect,  Mr.  Desjardins  is  fully  in  accord  with  him.  On 
the  basis  of  his  wide  study  of  the  subject,  he  has  come  to  the 
conclusion  that  productive  and  distributive  co-operative  societies 
should  always  be  separately  organized  from  the  credit  and 
banking  associations.  This,  of  course,  does  not  hinder  a  man 
from  being  at  the  same  time  a  member  of  several  societies 
organized  for  different  purposes.  By  keeping  the  associations 
separate,  each  is  forced  to  stand  or  fall  on  its  own  merits; 
and  the  failure  of  one  branch  of  co-operative  enterprise  need 
not  bring  about  the  downfall  of  the  whole  movement.  On  this 
account  the  Quebec  societies  confine  themselves  entirely  to  the 
credit  and  banking  business. 

i2Henry  W.  Wolff,  op.  cit.,  74  and  198-9. 
i^Ibid.,  173. 


A  Typical  Society.  45 

Finally,  we  note  that  the  Quebec  Syndicates  Act  makes  local 
control  a  fundamental  principle  of  the  Canadian  associations. 
No  branch  system  or  other  centralized  organization  is  thus  far 
permitted.  In  Europe,  on  the  contrary,  the  establishment  of 
branches  and  the  centralization  in  unions  constitutes  one  of  the 
most  distinctive  features  of  the  movement.  We  found  Schulze- 
Delitzsch,  in  1859,  organizing  his  ''Allgemeiner  Verband  der 
deutschen  Erwerbs-  und  Wirtschafts-genossenschaften."^*  In 
1899,  Raiffeisen  established  the  "  General  Verband  landlicher 
Genossenschaf  ten  " ;  and  the  precedent  so  established  has  been 
generally  followed  throughout  Europe.^"  The  bank  of  Augus- 
burg,  for  example,  with  its  250  branches,  covers  the  whole 
province  of  Upper  Bavaria  ;^^  the  co-operative  bank  at  Milan 
has  300  local  branches  ;^^  and  the  town  banks  of  Switzerland 
ere  concentrated  in  the  Swiss  People's  Bank  with  its  branches 
all  over  the  nation.^^  Then  we  find  the  rural  banks  of  France, 
to  the  number  of  1,638,  affiliated  in  the  "  Caisses  Regionales," 
and  the  "  Centre  federatif  du  credit  populaire  en  France " 
uniting  the  town  banks  ;^^  the  Belgian  "  Boerenbond  Beige," 
held  together  by  its  system  of  central  banks  i^''  and  the  Swiss 
Verband,  consolidating  the  country  banks  of  that  nation.^^  In 
fact,  almost  everywhere  in  Europe  we  find  the  co-operative 
banks  united  in  strong  federations  around  systems  of  central 
banks. 

This  system  of  centralization  has  its  advantages.  Indeed, 
where  the  government  is  promoting  the  movement,  as  is  so  fre- 
quently the  case  in  Europe,  some  form  of  organized  union  is 
indispensable.  Whatever  may  be  the  effect  of  this  dependence 
upon  state  aid,  its  dispensation  necessitates  union  and  some 
measure  of  government  inspection.  With  or  without  govern- 
ment assictance,  centralization  may  be  effectively  used  in 
establishing  new  societies.     In  Finland,  for  example,^^  and  in 

14C.  R.  Fay,  op.  cit.,  20.  i^jbid.,  21. 

i«H.  W.  Wolff,  op.  cit.,  86.  i7ibid.,  152. 

ISC.  R.  Fay,  op.  cit.,  67.  isibid.,  68-70. 

2oibid.,  69.  2iibid.,  74. 

22E.  A.  Pratt,  op.  cit.,  192-3. 


46  Co-operative  Banking  in  Quebec, 

the  Grand  Duchy  of  Luxemburg,^^  central  banks  were  estab- 
lished first  to  act  as  agencies  in  organizing  local  associations. 
Even  in  Quebec,  though  there  is  no  legal  or  financial  connection 
of  the  different  associations,  it  is  difficult  to  see  how  the  work 
of  organization  would  go  on  without  the  unifying  spirit  of  Mr. 
Desjardins.  Seldom  has  a  "  caisse  "  been  started  without  his 
presence;  and  the  Levis  association  with  its  constitution  and 
by-laws  has  served  as  a  model  for  all  the  others.  In  a  letter 
of  March  22,  1910,  he  writes :  *'  More  than  sixty  invitations 
have  been  received  by  me  for  new  ones  to  be  established  in  the 
course  of  the  spring  and  summer." 

The  chief  advantage  of  centralization,  however,  comes  from 
its  efficiency  in  circulating  and  equalizing  financial  reseurces. 
This  is  desirable  whether  the  banks  be  independent  or  state 
aided.  Indeed,  it  is  maintained  that  where  the  surplus  of  one 
locality  can  be  brought  to  supply  th^  deficiency  of  another,  any 
necessity  for  outside  selp  usually  disappears.  The  central 
bank,  being  in  touch  with  all  the  affiliated  branches,  acts  as  a 
sort  of  clearing  house  for  funds.  Surplus  and  deficit  balance 
each  other  throughout  the  system,  and  the  resources  of  the 
whole  union  generally  balances  the  call  for  loans  and  advances. 

In  case  the  funds  within  the  union  are  insufficient,  the  cen- 
tral bank  may  serve  as  a  medium  through  which  funds  may 
be  secured  on  reasonable  terms  from  outside  sources.  These 
institutions  are  supposed  to  be  organized  on  the  regular  limited 
liability  basis ;  and  to  be  in  touch  with  the  capitalist  money 
markets  of  the  country.  Hence,  they  may  be  expected  to  secure 
better  terms  for  loans  than  the  less  experienced  local  credit 
associations.^* 

Possibly  the  main  objection  that  can  be  urged  against  central 
banks  is  that  they  may  result  in  the  concentration  of  capital  in 
certain  districts  to  the  impoverishment  of  others.  There  is  a 
tendency  among  thrifty  but  unprogressive  people  to  over- 
emphasize saving  to  the  neglect  of  the  stimulation  of  enterprise. 
The  expectation  of  profits  is  a  necessity  if  saving  is  to  be  stimu- 

23lbid.,  223. 

240n  this  whole  subject,  see  Wolff,  Co-operative  Banking,  50-60. 


A  Typical  Society.  47 

lated;  and  this  in  turn  demands  that  there  be  enterprise  and 
fruitful  investment  somewhere.  If  the  surplus  may  be  trans- 
ferred through  a  central  bank  to  some  neighborhood  where 
investment  is  easy  and  business  keen,  there  will  be  less  incen- 
tive to  develop  local  resources.  The  end  and  aim  of  co-opera- 
tive effort,  however,  should  be  to  ferret  out  every  profitable 
way  in  which  credit  may  be  employed  in  the  immediate  neigh- 
borhood. One  of  the  most  serious  charges  brought  against 
chartered  and  savings  banks,  insurance  companies,  etc.,  is  that 
they  drain  the  different  localities  of  the  funds  which  should  be 
utilized  at  home.  Under  a  centralized  system  of  co-operative 
credit  the  same  evil  might  possibly  result. 

Then,  too,  there  is  a  sense  of  security  and  confidence  in  the 
fact  that  the  funds  of  the  society  are  being  invested  right  under 
the  supervision  of  the  membership.  This  means  a  great  deal, 
especially  to  people  whose  knowledge  and  interests  extend  little 
beyond  their  native  parish.  Among  such  simple-minded  folk 
there  is  a  feeling  that  you  never  can  tell  what  will  happen  to 
your  savings  if  they  are  sent  away  to  the  big  city,  where  all 
sorts  of  money-making  schemes  are  being  hatched.  As  we  shall 
see,  this  confidence  in  home  management,  and  in  the  local  use 
of  funds,  has  been  an  important  factor  in  determining  the  suc- 
cess of  the  French  Canadian  associations. 

Still,  we  believe  that  the  time  is  not  far  off  when  some  system 
of  centralization  would  be  of  considerable  benefit  to  the  Quebec 
societies.  There  have  already  come  to  light  several  instances 
in  which  some  banks  have  had  more  funds  than  they  could 
possibly  find  use  for,  while  others  had  a  greater  demand  for 
loans  than  they  could  meet  with  their  own  resources.  It  would 
obviously  be  to  their  mutual  advantage  if  such  associations 
could  be  made  to  supplement  each  other.  We  can  see  no  reason 
why  this  could  not  be  accomplished  with  safety  on  the  plan 
proposed  by  Schulze-Delitzsch  of  having  a  strong,  independent 
joint  stock  bank  bound  to  the  co-operative  banks  through  a  con- 
trolling interest  in  its  stock.^^  Indeed,  many  of  the  other  forms 
of  centralization  seem  to  be  giving  excellent  results  in  Europe. 

25Henry  W.  Wolff,  op.  cit.,  160-162. 


48  Co-operative  Banking  in  Quebec. 

We  may  expect  to  find  the  Quebec  societies  grapple  with  this 
problem  as  soon  as  the  need  of  a  solution  becomes  imperative. 
It  is  probable  that  some  scheme  of  interrelation  will  be  worked 
out  which  will  preserve  local  independence,  security  and  enter- 
prise; and,  at  the  same  time,  enable  each  of  the  societies  to 
stimulate  the  others  by  an  interchange  of  ideas,  and  to  render 
each  other  financial  assistance  which  shall  be  mutually  advan- 
tageous. 


CHAPTER  III. 

ECONOMIC   AND   SOCIAL   EFFECTS   OF   CO-OPERATIVE   CREDIT 
ASSOCIATIONS  IN   QUEBEC. 

The  Province  of  Quebec,  over  which  these  societies  are 
springing  up,  stands  easily  second  among  the  provinces  of  the 
Dominion  in  population  and  in  the  development  of  its  resources. 
First  comes  Ontario,  the  banner  province  of  the  federation.  At 
the  outset  of  our  study  of  this  part  of  the  problem,  let  us  take 
such  a  bird's  eye  view  of  the  economic  and  social  situation  as 
we  can  obtain  from  the  following  sets  of  figures  comparing 
Ontario  and  Quebec.  The  statistics  are  from  the  census  of 
1901,  except  where  another  date  is  given,  in  which  case  they 
are  taken  from  a  compilation  issued  by  the  Department  of  the 
Interior  in  1909: 

Quebec.  Ontario. 

Area  351,873  sq.  mi.  260,862  sq.  ml 

Population  1,648,898  2,182,947 

Families  307,304  455,264 

Houses  305,527  459,742 

Average  size  of  family 5.36  4.97 

Area  in  crops   4,704,396  ac.  9,212,478  ac 

Values  of : 

1.  Farm  lands   248,236,361  $536,755,663 

2.  Buildings  102,313,898  211,206,905 

3.  Live  stock   58,488,457  131,827,762 

4.  Implements  27,038,205  52,697,739 

5.  Field  crops  44,851,108  102,138,819 

6.  Forest  products   18,969,716  21,351,898 

7.  Fisheries  (1907)   2,047,390  1,935,025 

Education : 

1.  Number  of  schools  6,549  6,413 

2.  Number  of  teachers  13,139  10,643 

3.  Number  of  pupils   372,599  478,549 

4.  Expenditure   $4,465,537  $8,769,876 

Manufactures  (1905)  : 

1.  Capital  $255,497,662  $397,484,705 

2.  Wages  47,160,452  82,415,520 

3.  Value  of  product 219,861,648  367,850,002 


50  Co-operative  Banking  in  Quebec. 


Judging  from  the  above  figures,  and  many  others  that  might 
be  given,  we  see  that  Quebec  occupies  no  mean  position  among 
the  provinces  of  the  Dominion.  This  would  be  still  more  evi- 
dent were  we  to  take  the  corresponding  statistics  for  the  other 
provinces  into  consideration. 

Still,  the  person  who  has  obtained  his  first  acquaintance  with 
the  social  and  economic  life  of  Quebec  from  the  data  of  the 
census,  is  apt  to  be  somewhat  disappointed  on  coming  into  close 
quarters  with  actual  conditions.  The  measure  of  his  disap- 
pointment will  depend,  to  be  sure,  upon  the  economic,  social  and 
intellectual  environment  in  which  his  own  standards  have  been 
formed.  If  he  be  a  native  of  Eastern  Ontario  or  of  the  Atlantic 
seaboard,  it  is  quite  possible  that  he  may  be  familiar  with  in- 
dustrial conditions  differing  little  from  those  prevailing  in 
Quebec.  It  is  hardly  likely  that  he  will  have  sprung  from  any 
community  less  in  touch  with  modern  intellectual  life.  But,  in 
the  Eastern  Provinces  and  neighboring  states  there  are  many 
communities  that  present  just  as  unprogressive  an  aspect, 
economically,  as  any  part  of  this  French  Canadian  province. 
Should  our  investigator  have  come  from  central  or  western 
Ontario,  or  should  he  be  famiHar  with  conditions  in  the  western 
provinces,  or  in  any  one  of  the  great  mjaority  of  the  United 
States,  he  will  be  impelled  to  search  for  a  cause  of  the  general 
slowness  of  progress  which  prevails  over  the  greater  portion  of 
Quebec. 

He  turns  first  to  the  natural  resources  of  the  country.  The 
land  suitable  for  iagriculture  forms  a  comparatively  small  pro- 
portion of  the  total  provincial  area.  But  the  soil  is  of  good 
quality  and  is  undoubtedly  capable  of  yielding  much  better 
returns  than  it  does  under  present  methods  of  agriculture.  As 
we  shall  see  in  the  next  chapter,  however,  this  is  a  criticism 
which  might  apply  with  equal  force  to  most  of  the  older  sections 
of  the  United  States  and  Canada.  Many  agricultural  commu- 
nities in  Quebec  in  proximity  to  the  cities  are  worked  in  an 
up-to-date  manner.  But  as  one  passes  down  the  St.  Lawrence 
on  either  bank  he  will  have  little  difficulty  in  imagining  himself 
among  the  small  peasantry  of  certain  parts  of  Europe.      The 


Economic  and  Social  Effects.  51 

land  itself  in  many  sections  is  surveyed  in  such  a  manner  as 
to  make  effective  agriculture  impossible.  The  farm  may  have 
a  frontage  which  resembles  a  town  lot  in  its  narrowness,  and 
which  may  stretch  back  from  the  highway  a  mile  or  two,  de- 
pending on  the  amount  of  land  a  man  owns.  This  is  an  advan- 
tage from  the  point  of  view  of  the  ''  habitant,"  who  so  loves  to 
be  in  constant  social  intercourse  with  his  fellows.  The  houses 
are  generally  built  on  the  front  of  each  farm,  giving  the  public 
highway  the  appearance  of  a  long  country  village  street.  Peo- 
ple at  work  in  the  fields,  or  at  milking  time  morning  and 
evening,  may  shout  a  greeting  to  each  other.  After  the  day's 
work  is  over,  and  on  Sunday  afternoon,  they  gather  together 
on  the  verandas  formed  by  the  wide  projecting  eaves  of  the 
humble  cottages,  and  enjoy  the  community  life  which  means 
more  to  the  French  Canadians  than  worldly  prosperity. 

As  we  study  the  work  on  these  farms,  we  find  it  in  marked 
contrast  to  agriculture  elsewhere  in  America.  The  crops  vary 
a  great  deal.  In  some  places  the  land  is  naturally  poor;  in 
others  it  has  become  impoverished ;  again  we  strike  rich  bottom 
lands  with  fertility  still  unexhausted;  while  occasionally  we 
come  upon  farms  which  have  been  maintained  or  built  up  by 
scientific  agriculture.^  Manual  labor,  and  especially  the  work 
of  women  and  children,  is  a  much  more  prominent  factor  in 
rural  life  than  elsewhere  in  Canada  and  the  United  States.  The 
scythe,  the  cradle,  and  the  hand-rake  are  still  important  imple- 
ments on  most  of  the  farms.  The  machinefy  for  the  utilization 
of  horse-power  often  appears  inefficient  to  one  brought  up  on 
a  central  Ontario  farm.  Going  back  the  long  narrow  lane,  we 
meet  the  farmer  on  a  light  single  waggon  piled  high  with  about 
one-quarter  the  amount  of  hay  usually  seen  on  a  two-horse 
waggon-rack.  Further  back,  we  find  a  son  riding  a  one-horse 
mower  in  a  field  of  clover.  The  fact  that  a  light  single  harrow, 
and  in  some  cases  a  one-horse  plow,  were  used  in  preparing  the 
soil  explains  the  unevenness  of  the  surface,  and,  in  part,  the 

iM.  Leon  Gerin,  Deux  families  rurales  de  la  rive  sud  du  Saint- 
Laurent  Des  Memoires  de  la  Societe  Royal  du  Canada,  Troisieme 
Serie,  1908-9,  Vol.  ii,  Section  1. 


52  Co-operative  Bankii^g  in  Quebec. 

lightness  of  the  crop.  The  farm  buildings  are,  for  the  most 
part,  small  and  inefficient.  Large  frame  barns  with  stone 
stabling  underneath,  such  as  are  seen  one  nearly  every  farm  in 
large  sections  of  Ontario,  are  seldom  or  never  found.  On  the 
whole,  we  must  conclude  that  the  French  Canadians  are  far 
from  making  the  best  possible  use  •  of  their  agricultural  re- 
sources. 

But  what  about  the  other  resources  of  the  province?  The 
most  important  among  these  are  undoubtedly  the  products  of 
the  forest.  The  lumbering  of  the  great  valley  of  the  Ottawa 
has  for  a  couple  of  generations  spread  far  and  wide  the  fame 
of  the  French  Canadian  as  a  lumberman  and  river-driver.  Thus 
far,  however,  this  industry  has  been  largely  an  exploitation, 
rather  than  a  development  of  resources.  The  Frenchman  has 
been  the  useful  and  generally  poorly  paid  tool  by  means  of 
which  the  outsider  has  been  enabled  to  devastate  the  natural 
wealth  of  his  native  province.  He  has  done  the  work.  Others 
have  pocketed  the  spoils.  The  winter  work  of  the  lumberman 
is  being  pushed  farther  and  farther  back,  leaving  vast  stretches 
of  territory  covered  with  dry  brush,  a  prey  to  forest  fires.  Land 
which  is  unfit  for  anything  but  forest  culture,  and  which,  with 
proper  care,  could  be  made  a  permanent  source  of  wealth,  is 
laid  barren  at  one  stroke  by  individual  and  corporate  greed ;  and 
but  seldom  do  we  find  the  man  with  insight  enough  and  suffi- 
cient spirit  to  raise  a  cry  of  protest.  Where  an  exceptional 
individual  or  two  have  been  aroused  and  have  voiced  a  message 
of  indignation  and  warning,  it  has  sounded  as  one  crying  in 
the  wilderness,  with  none  to  go  out  and  hearken. 

Where,  let  us  now  enquire,  are  the  industries  for  which  this 
wholesale  spoHation  of  the  forest  would  lead  us  to  look?  In 
Ottawa,  Montreal,  Hull,  and  a  few  other  places  there  are  the 
lumber  mill  sections  of  the  city,  squalid  and  uninviting,  where 
poorly  paid  workmen  eke  out  a  miserable  existence.  At  Hull 
are  the  Eddy  Pulp  Works,  which  point  to  the  possibilities  which 
lie  within  the  resources  of  the  province.  But  Quebec  herself 
has,  up  to  the  present,  received  but  small  benefit  as  compared 
with  the  depletion  of  her  natural  wealth.     The  export  of  raw 


Economic  and  Social  Effects.  53 

or  half -finished  materials  has  conferred  on  the  foreigner  the 
bounty  of  her  splendid  resources,  while  Quebec  has  been  content 
with  the  paltry  toll  collected  as  they  passed  beyond  her  grasp. 

The  same  process  is  going  on  yet.  The  province  still  has  the 
finest  areas  of  spruce  pulp-wood  in  existence.  The  industrial 
possibilities  latent  in  these  vast  forests  of  small  spruce  are 
almost  beyond  comprehension.  The  subject  has  been  admirably 
treated  by  Mr.  Errol  Bouchette  in  his  book,  "  LTndeependance 
ficonomique  du  Canada  Frangais,"  1905.  He  goes  into  the 
modern  development  of  the  pulp  and  fiber  ware  industry  in  all 
its  phases ;  and  shows  that  the  French  Canadians,  owing  to  their 
artistic  temperament,  are  eminently  fitted  to  carry  it  to  the 
highest  degree  of  perfection.  But  high  industrial  efficiency  in 
any  line  presupposes  a  thorough  system  of  general  and  technical 
education.  This,  he  maintains,  is  what  Quebec  stands  most  in 
need  of,  if  she  is  ever  to  take  the  unique  place  in  the  industrial 
world  for  which  she  is  fitted,  both  by  her  natural  resources  and 
the  potential  skill  of  her  population. ^ .  But  up  to  the  present 
the  pulp  wood  resources  of  the  province  seem  to  be  suffering 
the  same  fate  as  befel  her  forests  of  large  timber.  The  best  of 
the  pulp  wood  areas  are  being  slashed  through,  leaving  the  re- 
fuse as  tinder  for  forest  fires.  The  fire  destroys  all  seeds  and 
young  trees;  and  nothing  remains  but  a  barren  stony  waste, 
which  once  supported  what  might  have  been  a  perennial  source 
of  wealth  and  industrial  prosperity. 

Moreover,  this  material  is  largely  exported  in  a  raw  or  only 
partly  finished  state;  which  means,  again,  that  the  province 
receives  but  a  small  share  of  the  benefit  possible  from  the  de- 
pletion of  her  resources.  In  1908,  there  were  exported  from 
Canada  to  the  United  States  901,861  cords  of  rough  pulp  wood 
blocks,  valued  at  $4,655,371.  In  the  same  year  there  were  ex- 
ported 4,811,163  cwt.  of  ground  pulp,  valued  at  $4,037,852,  of 
which  all  but  6,664  cwt.  went  to  the  United  States.  The  exact 
figures  for  the  provinces  are  not  available,  but  it  is  estimated 

2Errol  Bouchette,  L'Independance  ficonomique  du  Canada  Frangais, 
Chapter  v,  especially  page  98. 


54  Co-operative  Banking  in  Quebec. 

that  nearly  all  of  this  material  came   from  the  province  of 
Quebec. 

Besides,  the  province  has  splendid  mineral  resources.  These 
remain  for  the  most  pj^rt  undeveloped,  and  even  largely  unex- 
plored. But  it  is  to  be  noticed  again  that  where  they  are  being^ 
worked,  the  products  are  being  sent  in  the  rough  state  to  create 
industries  elsewhere.  Let  one  example  suffice.  Quebec  seems 
to  have  a  practical  monopoly  of  the  asbestos  deposits  of  Canada. 
During  the  year  1908  she  exported  59,033  tons  of  asbestos,, 
valued  at  $1,703,575.  Of  this  46,846  tons  was  received  by  the 
United  States.  We  have  only  to  think  of  the  different  articles 
which  are  manufactured  from  this  mineral  to  get  some  idea  of 
the  loss  represented  by  its  export  in  the  crude  form. 

The  people  are  following  their  resources.  They  have  flocked 
by  the  tens  of  thousands  to  the  eastern  states,  where  they  are 
developing  an  individuality  and  initiative,  and  achieving  a  pros- 
perity which  was  impossible  at  home.  This  helps  to  refute  the 
arguments  of  some  who  believe  that  the  unprogressiveness  of 
French  Canada  is  due  to  the  inherent  character  of  the  people. 
It  is  held  that  they  are  naturally  lacking  in  self-reliance,  in 
initiative  and  in  the  persistence  which  compels  success ;  that 
they  are  more  fitted  to  be  the  docile  instruments  of  exploiting 
leaders  than  for  the  individualism  of  democracy. 

This  view  would  seem  to  be  justified  by  a  consideration  of 
the  masses  in  French  Canada  as  they  appear  to-day.  We  have 
only  to  look  around,  however,  among  the  leaders  in  the  political 
and  intellectual  life  of  Canada,  to  be  assured  that  the  French 
race  has  not  yet  lost  its  virility.  There  are  men  who  are  worthy 
of  their  ancestors  who  stubbornly  contested  the  possession  of 
the  continent  with  England's  bravest  sons.  We  believe  that  if 
every  French  Canadian  could  have  a  training  and  experience 
such  as  has  brought  these  men  to  the  fore,  the  race  would  take 
its  place  among  the  most  progressive  elements  in  the  population 
of  the  new  world. 

The  French  Canadians  have  had  a  longer  uncontaminated 
descent  upon  American  soil  than  any  other  white  race.  .  Mr 
Benjamin  Suite,  who  has  made  a  very  careful  study  of  the 


Economic  and  Social  Effects.  55 

origin  of  the  French  Canadian,  estimates  that  the  original  emi- 
grants, men,  women  and  children,  did  not  greatly  exceed  five 
thousand  souls.  His  conclusion  is  that  the  type  is  either  pure 
Norman  or  mixed  Saxon  and  Norman,  and  that  there  has  been 
comparatively  little  admixture  of  new  elements  since.  Of  this 
stock,  there  are  now  over  three  million  descendants  in  Canada 
and  the  United  States.  On  the  strictly  materialistic  interpreta- 
tion of  history  we  would  expect  to  find  them  the  most  American 
of  Americans.  Other  nationalities  are  thansformed  in  a  gen- 
eration, physically,  mentally  and  spiritually.  The  children  of 
Russian  Jews,  Poles,  Swedes,  Norwegians,  Germans  and  other 
northern  races  begin  at  once  to  take  their  places  in  the  indus- 
trial and  intellectual  life  of  America. 

How  is  it,  we  are  compelled  to  ask,  that  the  influx  of  French 
Canadians  into  the  New  England  states  is  regarded  in  about  the 
same  light  as  the  invasion  of  Hindoos,  Japs  and  Chinamen  in 
the  West?  Physically,  they  are  in  no  way  inferior.  They  may 
average  a  little  shorter  in  stature  than  other  Americans  and 
Canadians ;  but  the  student  of  eugenics  will  be  delighted  by  the 
high  percentage  of  well-knit,  agile  young  men,  and  beautiful, 
bright-looking  young  women  to  be  found  in  both  the  urban  and 
rural  districts  of  Quebec.  It  cannot  be  on  the  ground  of  physi- 
cal inferiority  that  they  are  among  the  most  unwelcome  of 
immigrants  to  the  United  States  It  is  on  other  grounds  that 
objections  are  raised.  They  are  charged  with  being  unenter- 
prising and  unaggressive,  with  accepting  lower  wages  than 
other  American  workmen,  thus  bringing  down  the  standard  of 
living. 

Why  such  charges  should  be  preferred  against  a  race  with 
the  glorious  antecedents  of  the  French  Canadians  can  be  under- 
stood only  in  the  light  of  their  history  since  French  political 
supremacy  received  its  death  blow  on  the  Plains  of  Abraham. 
A  people  is  largely  molded  in  accordance  with  the  standards  set 
by  its  great  men  and  its  national  traditions.  French  idealism, 
in  all  its  most  vital  aspects,  ceased  to  dominate  Canada  with 
the  lowering  of  Montcalm's  colors  upon  the  citadel  of  Quebec. 
But  English  heroes  and  historic  traditions  did  not  supplant  the 


56  Co-operative  Banking  in  Quebec. 

long  list  of  achievements  by  French  discoverers,  explorers,  war- 
riors and  statesmen  whose  lives  had  been  given  to  the  early 
development  of  America.  In  so  far  as  the  province  of  Quebec 
is  concerned,  what  really  occurred  was  not  the  fa]l  of  French 
before  English  political  supremacy.  It  was  the  transfer  of  the 
reins  of  government  from  French  civil  authority  to  the  control 
of  the  clergy  of  the  Roman  Catholic  church.  We  need  find 
little  difficulty  in  believing  that,  had  France  remained  in  political 
control,  the  intellectual  life  of  the  province  would  have  kept 
pace  with  the  rapid  development  in  the  motherland;  and  it  is- 
difficult  to  estimate  how  such  an  intellectual  evolution  might 
have  reacted  upon  the  industrial  development.  But  as  it  was, 
England  relieved  herself  of  responsibility  and,  at  the  same  time, 
of  the  danger  of  revolt,  by  what  practically  amounted  to  a 
recognition  of  the  supremacy  of  the  church  in  things  temporal 
and  spiritual.  For  what  there  exists  of  good  in  the  province 
we  must  give  the  church  the  credit.  The  blame  for  any  lagging 
behind  in  the  march  of  progress  must  rest  at  her  door  as  well.^ 
In  his  admirable  discussion  of  this  subject,  Andre  Siegfried 
says :  "  Let  us  make  haste  to  acknowledge  that  upon  the  banks 
of  the  Saint  Lawrence  the  Catholic  church  has  achieved  a  place 
apart,  that  it  has  always  proved  a  loyal  and  powerful  protection 
to  its  disciples,  and  that  our  race  and  tongue  owe  to  it,  perhaps,. 

^Note :  To  the  many  Catholic  friends  who  have  so  generously  aided 
him  in  making  this  investigation,  the  v^riter  must  here  offer  a  word  of 
explanation.  He  probably  seems  to  be  making  a  malicious  attack  upon 
all  that  they  hold  most  sacred.  The  only  apology  he  can  offer  is  to 
state  honestly  that  he  regards  all  churches  and  all  creeds  as  but  inci- 
dents in  the  development  of  the  race.  Religion  is  something  deeper  and 
continues  to  live  by  ever  finding  new  forms  to  clothe  itself  in.  Organi- 
zations and  creeds  never  provide  for  their  own  revision.  They  make 
no  provision  for  progress.  Their  prevailing  attitude  toward  investiga- 
tion is  repressive.  Their  chief  concern  is  to  quench  all  truth  and  all 
progress  which  would  endanger  their  cherished  dogmas.  The  recent 
controversy  raised  by  the  expulsion  of  Dr.  Workman  from  the  Method- 
ist College  in  Montreal,  and  a  multitude  of  similar  incidents  which  could 
be  gathered  from  the  activity  of  contemporary  Protestant  denomina- 
tions, all  go  to  show  that  there  is  not  one  of  these  sects  but  would  take 
advantage  of  a  situation  such  as  has  favored  the  Catholic  Church  in 
Quebec.  For  a  discussion  of  the  principles  underlying  this  point  of 
view,  the  reader  is  referred  to  an  article  entitled  "  Religion  and  the 
Mores,"  by  Prof.  Wm.  Graham  Sumner  of  Yale,  in  the  American  Jour- 
nal of  Sociology  for  March,  1910. 


Economic  and  Social  Effects.  57 

their  survival  in  America."*  Again,  speaking  of  the  French 
and  EngHsh-speaking  populations  in  Canada,  he  writes :  "After 
a  hundred  and  fifty  years  of  life  in  common,  as  neighbors  under 
the  same  laws  and  the  same  flag,  they  remain  foreigners  and,  in 
most  cases,  adversaries."^  The  survival  of  his  race  anl  language 
evidently  affords  considerable  gratification  to  a  Frenchman, 
loyal  to  his  national  traditions.  But  this  loyalty  does  not  blind 
the  scientific  student  of  society  to  the  other  side  of  the  question. 
He  goes  into  the  matter  and  lays  bare  the  cost  at  which  the 
racial  integrity  has  been  preserved. 

In  these  two  quotations  we  have  the  key  to  the  moral,  social 
and  industrial  situation  in  Quebec.  Here  "  the  Catholic  church 
has  achieved  a  place  apart,"  and  this  position  has  been  won  by 
looking  on  the  rest  of  the  world  as  "  foreigners  and  iij  most 
cases  adversaries."  For  over  one  hundred  and  fifty  years  this 
seclusion  has  persisted.  The  church  has  controlled  to  a  large 
extent  the  political  situation,  and  has  dominated  absolutely  the 
educational  system  of  the  province, — the  teachers  who  taught, 
the  books  studied,  the  lectures  heard,  the  newspapers  read. 
This  has  had  some  good  results.  The  people,  as  a  whole,  are 
hospitable,  happy  and  content;  in  their  home  life  and  simple 
-economic  relations,  they  are  highly  moral;  the  training  which 
the  young  girls  receive  in  the  convents  fits  them  to  become  the 
most  faithful  of  wives  and  the  fondest  of  mothers. 

But  here  our  praise  must  call  a  halt.  Happiness  and  content- 
ment are  dearly  bought  if  purchased  at  the  expense  of  progress. 
The  large  number  of  French  Canadian  girls  who  find  their  way 
as  prostitutes  into  the  brothels  of  Canadian  and  American 
cities  would  indicate  that  the  morality  at  home  is  based  upon 
tutelage  rather  than  upon  strength  of  individual  character.  The 
high  infant  mortality  among  French  Canadian  families  shows 
that  the  training  for  motherhood  breaks  down  before  the  all- 
important  test  of  its  efficiency. 

As  emphasized  throughout  Siegfried's  work,  the  policy  of  the 
Catholic  church  has  been  one  of  isolation.      The  influence  of 

^Andre  Siegfried,  The  Race  Question  in  Canada,  11-12. 
sibid.,  100. 


58  Co-operative  Banking  in  Quebec. 

Old  France,  where  the  church  has  been  forced  to  abandon 
trench  aftef  trench  before  the  onslaughts  of  triumphant  ration- 
alism, has  been  tabooed  as  the  direst  pestilence.  Contact  with 
the  rest  of  America  was  equally  feared.  Here  even  liberal 
Protestant  churches  are  making  themselves  ridiculous  in  their 
attempts  to  justify  their  long-cherished  dogmas  in  the  eyes  of 
modern  culture.  If  her  "  place  apart  "  were  to  be  preserved, 
the  church  must  control  every  avenue  through  which  mental 
stimuli  could  reach  her  people.  She  has  succeeded  in  a  way 
which  almost  passes  comprehension.  The  press  has  been  sub- 
jected to  a  rigid  censorship;  the  public  platform  has  also  been 
kept  well  under  control ;  the  education  of  Catholics,  who  form 
almost  ninety  per  cent,  of  the  population,  has  been  entirely  in 
the  hands  of  the  church.  Consequently,  almost  every  influence 
which  has  stimulated  modern  thought,  leading  to  creative  acti- 
vity and  progress,  has  been  rigorously  debarred  from  the 
educational  system  of  Quebec.  The  instruction  imparted  to  the 
young  was  strong  in  catechism  and  the  stories  of  the  saints,  the 
higher  education  was  classical  and  admitted  the  less  stimulating 
phases  of  mathematics  and  natural  science.  The  philosophy 
taught  was  the  logic  of  the  scholastics,  the  history  that  of  the 
church. 

But  such  Arcadian  simplicity  could  not  be  maintained  for- 
ever, even  in  the  province  of  Quebec.  Intellects  felt  the  glow 
of  the  brightening  flame  of  the  world's  culture  in  spite  of 
priestly  vigilance.  In  the  light  of  that  glow  they  saw  their  dear 
old  native  province  as  she  was,  fast  asleep  amid  the  turmoil  of 
the  world's  onward  rush.  It  was  time  that  she,  like  Rip  Van 
Winkle,  should  awake,  rub  the  cobwebs  of  one  hundred  and 
fifty  years'  accumulation  out  of  her  eyes,  and  see  where  the 
world  was  at.  To  make  a  long  story  short,  a  strong  progressive 
element  has  arisen  in  the  legislature  which  is  making  the  church 
and  the  clerical  political  party  quake,  lest  in  its  zeal  for  educa- 
tional reform  the  dominance  of  the  priesthood  may  be  under- 
mined at  its  foundation.  The  situation  is  admirably  illustrated 
by  the  following  extract  from  an  editorial  in  the  chief  organ  of 
the  Conservative  opposition,  "  L' Action  Sociale,"  of  July  5,. 
1909: 


Economic  and  Social  Effects.  59 

♦_ 

L'ENSEIGNEMENT  LIBRE. 

Au  banquet  Tellier,  a  Joliette,  le  chef  de  I'opposition  a  pro- 
noncee,  a  propos  d'instruction  publique,  des  paroles  qui  valent 
la  peine  qu'on  les  cite ;  les  voici : 

"  En  matiere  d'instruction  publique,  nous  croyons  qu'il  y  a 
place  pour  des  reformes  et  qu'il  reste  encore  du  chemin  a  faire 
avant  de  toucher  a  la.  perfection.  Mais  nous  sommes  loin 
d'admettre  que  notre  condition  soit  aussi  alarmante  que  se 
plaisent  a  le  proclamer  certains  organes  du  gouvernement. 

Nos  ecoles  primaires  laissent  sans  doute  a  desirer  sous  cer- 
tains rapports,  dans  bien  des  cas,  et  c'est  de  ce  cote  que  I'atten- 
tion  du  pouvoir  public  doit  surtout  se  tourner. 

II  ne  peut  etre  question  de  contrainte  a  I'egard  des  parents, 
il  ne  s'agit  que  de  les  aider,  de  les  encourager,  de  les  assister. 

Quant  a  nos  maisons  d'education  superieure,  grace  au  zele 
admirable  et  au  devouement  sans  borne  de  notre  clerge,  elles 
realisent  assez  parfaitement  I'objet  et  le  but  de  leur  fondation, 
et  nous  avons  raison  d'en  etre  fiers. 

S'est  le  devoir  du  gouvernement  de  venir  au  secours  de 
I'initiative  privee,  de  la  seconder,  de  faciliter  la  tache  de  tous 
les  bons  educateurs  de  la  jeunesse,  et  d'entourer  de  toute  sortes 
de  soins  et  de  protection  ceux  qui  nous  preparent  les  hommes 
de  demain. 

Ce  qui  importe  surtout,  c'est  de  conserver  toujours  la  reli- 
gion a  la  base  de  I'enseignement  et  de  ne  jamais  rien  faire 
qui  soit  de  nature  a  violenter  la  conscience  des  peres  de 
famille." 

M,  Tellier  a  raison  de  dire  qeu  la  religion  doit  demeurer  a 
la  base  de  notre  enseignement,  quelles  que  soient  les  reformes 
qu'on  y  fasse  par  ailleurs. 

On  a  longtemps  clame  dans  une  certaine  presse  canadienne, — 
qui  a  mis  une  sourdine  a  ses  reclamations  mais  ne  perd  encore 
aucune  occasion  de  les  faire  valoir, — que  la  provmce  de  Quebec 
est  une  province  d'arrieres,  de  toutes  fagons, 

A-t-on  jamais  tenu  compte  qu^  peine  apres  soixtante-quinze 
ans  d'organisation  scolaire,  nous  ne  pouvons  encore  atteindre 
ici  au  haut  degre  d'enseignement  et  de  culture  intellectuelle  ou 
sont  parvenues  certaines  nations  d'Europe,  qui  comptent  des 
universites,  des  institutions  et  des  methodes  d'enseignement 
etablies  depuis  cinq  ou  six  siecles? 

Apres  tout,  notre  systeme  educationnel  vaut  bien  celui  des 
autres  provinces  canadiennes. 


60  Co-operative  Banking  in  Quebec. 

Tous  sont  susceptibles  de  perfectionnement :  mais  tous  ne 
donnent  pas,  comme  le  notre,  liberte  absolue  a  renseignement 
religieux. 

A  quelque  secte  qu'ils  appartiennent,  nos  concitoyens  pro- 
testants  peuvent  avoir  ici  leurs  ecoles  distinctes,  maintenues  a 
meme  les  fonds  preleves  par  I'etat  pour  I'instruction  publique; 
et  il  ne  leur  en  coute  pas  plus  qu'il  n'en  coute  aux  catholiques. 

En  peut-on  dire  autant  du  systeme  scolaire  d'Ontario,  de  la 
Nouvelle-Ecosse,  du  Nouveau-Brunswick? 

Peut-on  comparer  au  notre  celui  du  Manitoba  et  des  pro- 
vinces de  rOuest,  oil  des  exigences  politiques  pitoyables,  des 
inuences  nefastes  ont  cause  qu'on  enlevat  aux  catholiques  des 
droits  certains  a  des  ecoles  separees? 

Sur  ce  point,  notre  organisation  scolaire  est  en  avant,  et  bien 
au-dessus  des  autres :  elle  reconnait  a  chaque  citoyen  le  droit 
de  faire  enseigner  a  ses  enfants,  dans  des  ecoles  de  son  choix, 
les  principes  de  la  religion  qu'il  pratique.  L'etat  no  contrecarre 
pas  la  volonte  du  citoyen,  il  lui  rend  justice. 

Sans  doute, — nul  n'y  contredit, — il  y  a  place,  dans  notre  sys- 
teme educationnel,  pour  des  reformes  importantes  :  ameliora- 
tion du  programme  scolaire,  augmentation  des  salaires  d'in- 
stituteurs,  creation  d'ecoles  techniques,  sont  au  tout  premier 
rang  de  ces  reformes.    Et  l'etat  tache  a  les  accomplir. 

Mais  le  principe  fondamental  de  I'instruction,  I'enseignement 
religieux,  doit  y  subsister,  sans  qu'on  y  porte  la  plus  legere 
atteinte. 

M.  Tellier  I'a  reconnu,  de  meme  que  nos  gouvernants  actuels, 
a  Quebec. 

C'est  une  garantie  pour  I'avenir,  il  importe  qu'on  la  mette  en 
relief,  et  qu'on  se  garde  de  I'oublier. 

Here  we  have  a  suggestion  of  the  reforms  for  which  the  lib- 
eral leaders  are  contending.  They  have  pointed  out  the  defects 
of  the  existing  educational  system ;  and  have  implied  that  these 
shortcomings  are  in  some  sense  due  to  clerical  control.  They 
are  advocating  the  establishment  of  provincial  scientifically  con- 
ducted technical  schools;  and,  as  tactfully  as  possible,  have 
pointed  out  that  the  present  elementary  educational  education 
affords  no  preparation  for  the  instruction  to  be  given  in  these 
institutions.  We  also  see  the  sort  of  arguments  which  are  used 
against  the  reformers.  They  are,  in  an  indirect  way,  accused 
of  attempting  to  undermine  religion,  of  interfering  with  the 


Economic  and  Social  Effects.  61 

rights  of  parents,  of  making  inroads  on  the  individual  Hberties 
permitted  under  the  present  school  system,  and  of  unjustly- 
maligning  the  admirable  system  of  primary  and  secondary  edu- 
cation of  the  province. 

In  a  letter  dated  Ottawa,  April  25,  1910,  Mr.  Errol  Bouchette, 
who  has  done  for  the  educational  movement  all  that  Mr.  Des- 
jardins  has  for  co-operative  credit,  writes  to  the  effect  that  the 
system  of  technical  schools  is  almost  completely  organized. 
There  is,  over  the  whole  system,  giving  it  unity  and  setting  the 
standards,  "  L'ficol  des  Hants  fitudes  Industrielles  et  Commer- 
cials." "  These  schools,"  says  Mr.  Bouchette,  "  are  costing 
millions,  but  they  will  mean  billions  to  the  future  of  Quebec." 

From  this  sketch  we  get  a  general  view  of  the  natural  re- 
sources, and  the  social,  industrial,  and  educational  conditions  of 
the  province,  which  has  become  the  field  of  operation  for  co- 
operative credit  associations.  We  have  been  introduced  to  a 
simple,  genial,  unenterprising  people.  They  are  stable  in  resi- 
dence and  occupation,  and  homogeneous  in  religion,  intellectual 
standards,  and  racial  descent.  They  have  a  heritage  of  splendid 
natural  resources,  which,  in  so  far  as  they  have  been  utilized, 
have  contributed  about  the  least  possible  to  the  general  well- 
being  of  the  people.  This  wastefulness  and  general  backward- 
ness we  attribute  to  isolation  from  the  thought  and  activity  of 
the  outside  world.  While  it  might  be  some  exaggeration  to  say 
that  "  There  the  richest  was  poor  and  the  poorest  lived  in 
abundance,"  the  people  are,  on  the  whole,  thrifty,  and  distress- 
ing poverty  is  seldom  met  with.  In  the  light  of  the  history  of 
the  European  movement,  we  would  judge  that  Quebec  should 
afford  an  ideal  field  of  operation  for  co-operative  credit.  Our 
task  is  now  to  determine  wherein  the  situation  is  being  altered 
in  any  respect  through  these  societies. 

In  the  first  place,  let  us  enquire  into  the  influence  upon  the 
church.  She  may  be  making  some  concessions,  but  still  reigns 
in  her  "  place  apart."  Any  attempt  at  reform  in  open  defiance 
of  her  wishes  would  have  small  chance  of  success;  while  a 
movement  which  could  in  any  way  reform. the  church  herself 
would  affect  the  whole  social  organism.    Now  this  is  just  what 


62  Co-operative  Banking  in  Quebec. 

co-operative  credit  is  helping  to  do.  The  French  Canadian 
clergy  are  becoming  aware  of  what  is  being  done  by  the  church 
in  the  different  countries  of  Europe.  We  shall  have  occasion 
in  the  next  chapter  to  refer  to  the  leadership  of  the  priests  in 
promoting  the  social  and  economic  welfare  of  their  people.  We 
shall  see  how  they  have  become  the  champions  of  technical 
education  on  a  scale  so  practical  and  far-reaching  as  to  influence 
the  humblest  peasant  farmer.  They  have  everywhere  identified 
themselves  with  the  co-operative  movement,  and  especially  with 
the  organization  and  management  of  the  credit  associations. 

On  the  basis  of  the  work  being  done  by  the  church  in  Europe, 
an  appeal  was  made  to  the  clergy  in  Quebec.  The  response  is 
seen  in  the  large  number  of  priests  who  are  studying  the  move- 
ment, and  who  are  taking  the  lead  in  the  establishment  of  socie- 
ties throughout  the  province.  Nor  has  the  good  work  ended 
here.  The  interest  aroused  in  these  associations,  whose  ultimate 
aim  is  the  promotion  of  industrial  enterprise,  has  called  atten- 
tion to  the  crying  need  for  technical  education ;  and  this  has  not 
been  without  its  influence  in  making  possible  the  present  reor- 
ganization of  the  school  system.  Thus,  we  see  how  the  work 
of  Mr.  Desjardins  has  converged  toward  the  same  goal  as  that 
of  Mr.  Bouchette  with  his  programme  of  educational  reform. 

The  revival  of  interest  in  provincial  welfare  has  extended 
even  to  a  slight  participation  in  the  conservation  movement 
which  has  been  sweeping  over  America.  During  its  last  ses- 
sion, the  Quebec  Legislature  enacted  that  "All  timbers  cut  on 
crown  lands  shall  be  manufactured  in  Canada,  that  is,  converted 
into  pulp  or  paper,  deals  or  boards,  or  into  any  other  article  of 
trade  or  merchandise  of  which  such  timber  is  only  the  raw 
material."  Ineffective  as  this  clause  is  reported  to  be,  it  does 
mark  the  beginning  of  an  effort  to  stay  the  ravage  which  has 
been  depleting  the  natural  resources  of  the  province. 

So  much  for  the  general  effects  of  co-operative  credit  upon 
the  province.  Let  us  now  turn  to  those  results  which  are  only 
to  be  discovered  from  a  study  of  the  working  of  the  individual 
societies. 

In  our  historical  survey,  we  have  dealt  with  the  hoarding 


Economic  and  Social  Effects.  63 

tendency  of  the  French  Canadians,  and  have  suggested  that  its 
persistence  might  prove  an  impediment  to  the  estabhshment  of 
co-operative  banking  in  Quebec  (page  11  above).  The  old 
habit  of  hoarding  specie  has  become  a  thing  of  the  past,  partly 
on  account  of  the  difficulty  of  obtaining  coin,  and  partly  be- 
cause the  people  have  become  convinced  of  the  reliability  of  the 
Canadian  bank  notes  under  the  system  established  since  confed- 
eration. Besides,  the  time  came  when  the  old  French  coins 
would  no  longer  pass  at  their  over-rated  valuation.  But  the 
hoarding  habit  is  by  no  means  a  thing  of  the  past.  Evidence 
of  this  fact  comes  cropping  up  in  the  most  unexpected  ways. 
Just  as  these  words  are  being  written,  a  Montreal  paper  comes 
to  hand  containing  the  following  item  of  news: 

St.  George,  Beauce,  March  28. — A  body  was  cremated  and  a 
house  and  all  its  contents  were  destroyed  by  a  fire  which 
broke  out  here  yesterday.  The  house  belonged  to  Jean  Du  lac, 
and  a  wake  was  being  held  over  the  body  of  his  dead  son 
when  the  fire,  which  was  caused  by  wax  tapers  igniting  the 
mourning  drapings  of  the  death  chamber,  broke  out.  Attempts 
to  save  the  corpse  proved  futile,  and  the  members  of  the 
family,  who  were  at  dinner  at  the  time,  barely  escaped  with 
their  lives.  The  house  and  the  furniture  as  well  as  several 
hundred  dollars  which  were  in  a  bureau  drawer  were  de- 
stroyed. 

From  such  evidence  we  see  that  bank  notes  are  taking  the  place 
of  the  hoarded  coin. 

But  it  is  remarkable  to  see  the  way  in  which  this  long- 
established  custom  is  yielding  before  the  establishment  of  the 
co-operative  credit  associations.  The  men  who  are  in  control 
of  these  societies  are  the  choice  of  the  membership.  The  dif- 
ferent departments  of  the  administration  check  each  other  up; 
and  besides,  the  parish  priest,  in  whom  the  people  trust,  has 
usually  some  position  of  responsibility  among  the  officers.  The 
profitable  use  of  the  funds  is  going  on  right  under  their  eyes. 
The  fact  that  withdrawal  is  so  easy  begets  further  confidence. 
So  m.any  families  are  represented  in  the  membership  that  it 
becomes  quite  the  fashion  to  belong  to  ''  La  Caisse  Populaire." 
Consequently,   we   find   people   seeking  out   the   office   of   the 


64  Co-operative  Banking  in  Quebec. 

society  who  would  never  have  entered  the  door  .of  a  regular 
bank,  with  its  polished  gratings  and  strange  men  behind  the 
wickets.    An  illustration  will  help  to  make  this  clear. 

In  talking  over  the  difficulties  arising  out  of  the  hoarding 
tendency,  Mr.  Desjardins  says:  "The  fact  that  hoarding  has 
been  so  common  explains  in  part  the  way  in  which  funds  often 
come  pouring  into  the  people's  banks  from  all  sorts  of  unex- 
pected sources.  For  example,  an  old,  plainly  dressed  woman 
came  into  the  office  one  day  and  asked  how  much  stock  one 
person  could  hold  in  the  bank.  I  told  her  that  the  present  limit 
set  by  the  last  general  meeting  was  one  thousand  dollars.  She 
took  out  of  her  clothing  a  large  roll  of  bills,  and  said  that  she 
would  like  to  take  shares  for  the  entire  amount.  I  asked  her 
how  much  she  had,  and  she  replied  that  she  was  not  sure.  She 
had  been  adding  to  the  roll  for  seventeen  years,  and  thought 
that  there  must  be  close  on  one  thousand  dollars.  I  counted  the 
money,  carefully  examining  each  note  lest  there  should  be  some 
worthless  ones  in  the  hoard.  They  were  all  good,  however,  and 
amounted  to  nine  hundred  and  some  seventy  odd  dollars.  When 
I  asked  her  why  she  had  never  put  her  money  in  the  bank,  she 
answered :  *  I  do  not  like  the  banks.  They  are  only  for  rich 
folks,  and  besides,  they  are  run  by  strangers.  But  I  know  you 
men  in  La  Caisse,  and  can  trust  you.'  "  Again,  in  a  letter  of 
April  4,  1910,  Mr.  Desjardins  writes:  "To-day  I  received  a 
letter  telling  me  of  a  bank  started  a  month  ago  in  a  compara- 
tively poor  rural  parish,  St.  Cajetan  d'Armah,  county  of  Belle- 
chasse.  In  the  one  month  it  had  accumulated  funds  to  the 
amount  of  ten  thousand  dollars.  I  fancy  it  must  be  hoarded 
money  in  part,  but  genuine  savings  for  the  rest;  as  the  young 
shantymen  are  just  coming  home  with  their  winter's  earnings. 
Is  it  not  a  splendid  result  ?  "  Other  illustrations  might  be  given 
of  the  fact  that  the  old  habit  of  hoarding,  which  has  played 
such  a  part  in  the  history  of  French  Canadian  banking  and 
currency,  is  breaking  down  readily  before  the  advance  of  co- 
operative credit  associations. 

We  come  now  to  the  evidence  as  to  the  promotion  of  saving. 
The  first  point  which  naturally  occurs  to  us  is  that  afforded 


Economic  and  Social  Effects.  65 

by  the  assets  accumulated  in  the  thirty- four  banks  now  in 
operation.  The  statistics  have  been  a  Httle  hard  to  get,  but 
this  table  compiled  by  Mr.  Desjardins,  giving  statistics  for 
twenty-six  of  the  leading  societies  down  to  April  1,  1910,  will 
serve  to  illustrate  the  influence  on  saving,  and  at  the  same  time 
show  the  use  made  of  the    funds  as  loans : 

Name  of  Society.                            operation.  paid  in.  of  loans. 

Time  in  Amount  Amount 

Time  in  Amount  Amount 

Name  of  Society.                            operation.  paid  in.  of  loans. 

La  Caisse  Populaire  de  Levis..  .9  yrs.  7  mos.  $301,662  33  $536,224  92 

St.  Joseph 8  yrs.  14,930  55  19,172  13 

St.  Malo  7  yrs.  40,964  06  143,995  91 

St.  Suveur  15  mos.  9,637  00  8,662  00 

St.  Victor  12  mos.  7,247  10  10,272  50 

LAncienne  Lorette  16  mos.  23,710  76  10,955  52 

St.  Charles  13  mos.  24,586  10  13,689  34 

Maria  18  mos.  9,117  35  7,982  85 

Danville   9  mos.  3,88171  5,195  00 

St.  Maurice   8  mos.  54,255  41  25,394  12 

Montreal 20  mos.  1,583  57  1,867  03 

Quebec  23  mos.  18,413  62  22,272  70 

Rimouski 17  mos.  2,729  26  1,389  00 

St.  Ulric   6  mos.  8,742  49  9,854  23 

Sayabec 9  mos.  1,709  66  2,363  00 

St.  Ephrem  6  mos.  2,579  60  2,420  54 

St.  Gregoire 18  mos.  3,073  50  2,300  00 

St.  Theophile  7  mos.  7,718  43  4,370  47 

St.  Gervais  VA  mos.  9,247  21  595  00 

St.  Narcisse  9  mos.  11,830  18  6,308  99 

Black  Lake 10  mos.  1,653  75  2,099  00 

Beauport 22  mos.  1,773  68  1,070  00 

Bonaventure 28  mos.  14,196  61  18,758  84 

Thedford  Mines  7  mos.  12,012  39  10,140  16 

Enfant  Jesus  6  mos.  2,337  62  2,077  18 

St.  Cajetan  4  mos.  48,082  92  4,242  00 

Totals $637,676  86    $873,672  43 

Mr.  Desjardins  estimates  that  complete  statistics  up  to  June, 
1910,  would  show  a  membership  of  about  15,000,  with  a  paid 
in  capital  of  three-quarters  of  a  million,  and  loans  amounting 


66  Co-operative  Banking  in  Quebec. 


to  fully  a  million  dollars.  This  must  be  considered  a  remark- 
able development  when  we  take  into  consideration  the  short 
periods  for  which  most  of  the  societies  have  been  in  operation, 
and  also  that  the  propaganda  is  the  work  of  one  man  giving 
his  services  without  a  cent  of  remuneration. 

The  question  which  next  arises  is  as  to  how  much  of  this 
accinnulation  represents  savings.  Would  most  of  it  have  been 
conserved  in  private  hoards  had  there  been  no  people's  banks? 
or  would  much  of  it  have  found  its  way  into  the  regular  banks 
or  savings  banks?  On  the  latter  question  there  would  seem  to 
be  a  general  concensus  of  opinion.  The  judgment  of  Mr. 
Desjardins,  that  but  a  very  small  percentage  of  the  funds  col- 
lected by  the  associations  would  ever  have  been  available  for 
credit  through  the  other  savings  banks,  seems  hardly  open  to 
controversy.  As  to  how  much  would  have  been  saved  up  in 
hoards,  there  is  much  more  room  for  difference  of  opinion.  In 
respect  to  thrift,  there  is  much  difference  between  urban  and 
rural  populations,  also  between  older  and  younger  members  of 
the  community  in  both  city  and  country.  The  farming  popula- 
tion, like  the  peasantry  of  old  France,  is  more  careful  in  spend- 
ing its  earnings,  and  more  given  to  hoarding  than  those  who 
live  in  towns  and  cities.  All  but  two  or  three  of  the  societies 
cater  almost  exclusively  to  agricultural  communities.  This 
would  lead  to  the  conclusion  that  much  of  the  funds  represented 
by  the  assets  of  Les  Caisses  might  have  been  saved  anyway  as 
private  hoards. 

But  even  in  rural  communities  there  is  reason  to  believe  that 
the  banks  are  having  an  influence  in  promoting  thrift.  Most  of 
the  young  men  from  the  farms  "  go  off  to  the  shanties  for  the 
winter."  For  about  five  months  of  the  year  they  have  but  little 
opportunity  to  spend  money,  except  by  a  little  gambling  among 
themselves.  On  coming  home  in  the  spring,  a  considerable  por- 
tion of  their  earnings  is  apt  to  be  spent  rather  recklessly;  so  that 
Mr.  Desjardins  is  probably  right  in  his  opinion  that  a  large  part 
of  the  ten  thousand  dollars  accumulated  the  first  month  at  St. 
Cajetan  d'Armah  represented  "  genuine  savings."  Besides, 
even  in  the  country,  there  is  a  great  deal  in  having  a  definite 


Economic  and  Social  Effects.  (y/ 


plan  for  saving,  such  as  is  inculcated  through  the  people's  banks. 
The  habit,  once  it  has  been  started  in  a  neighborhood,  spreads 
by  imitative  rivalry,  like  any  other  fashion. 

But  it  is  when  we  come  to  an  urban  community  like  Levis 
that  we  most  clearly  see  the  effects  of  the  society  in  promoting 
thrift.  Out  of  a  total  population  of  7,000,  we  have  a  member- 
ship of  1,000  in  La  Caisse.  This  means  that  the  families  of 
the  town  are  pretty  generally  represented.  As  we  look  through 
the  books  of  the  bank,  we  see  the  strongest  evidence  of  thrift. 
Most  of  the  entries  are  for  amounts  of  10  cents,  25  cents,  50 
cents,  75  cents,  etc.,  a  week,  representing  a  regular  portion  of 
the  weekly  earnings.  These  contributions  to  the  common  fund 
come  from  all  classes.  About  seventy  farmers  are  represented, 
whose  payments  are  more  irregular  and  for  larger  amounts. 
There  are  business  men  who  lend  to  the  association  the  dignity 
of  their  prestige.  Many  heads  of  families  from  among  the 
working  classes  manage  to  make  a  regular  addition  to  "  the 
nest  ^gg  they  are  laying  up  for  a  rainy  day."  But  more  import- 
ant still,  there  are  a  great  many  young  people  whose  earnings 
would  have  all  been  spent  from  week  to  week  had  they  not 
become  members  of  La  Caisse.  Among  them  are  quite  a  num- 
ber of  working  girls,  whose  savings  amount  to  several  thousands 
of  dollars.  There  are  over  one  hundred  and  fifty  young  unmar- 
ried men  who  have  close  on  $15,000  to  their  credit  on  the  books 
of  the  bank.  One  of  them,  who  rather  indifferently  entered 
the  association  just  because  his  friends  were  joining,  has  now 
$780  in  shares. 

This  habit  of  saving  is  beginning  to  tell  on  the  social  life  of 
the  community.  The  French  Canadians  are  naturally  artistic  in 
temperament,  and  passionately  fond  of  finery,  especially  in 
dress.  Shop  girls,  sewing  girls,  and  factory  girls  may  be 
plainly  enough  clad  while  at  their  work,  but  when  they  go  out 
in  the  evening,  though  they  usually  appear  in  fairly  good  taste, 
they  give  one  the  impression  of  being  dressed  much  beyond 
their  means.  They  often  stint  themselves  in  other  things,  it  is 
said,  in  order  to  have  the  latest  styles  in  clothing.  Mr.  Des- 
jardins  notes  a  great  many  instances  among  both  young  men 


68  Co-operative  Banking  in  Quebec. 

and  young  women  in  which  extravagance  in  dress  has  been  very 
much  modified  through  membership  in  the  society.  We  have 
one  case  in  particular  of  a  large  family  of  sewing  girls  who, 
within  the  past  nine  years,  have  laid  aside  over  two  thousand 
dollars  out  of  their  earnings.  Up  to  the  time  they  entered  the 
society  they  had  never  saved  a  cent.  They  became  interested  in 
the  scheme  and  began  to  lead  a  much  more  moderate  social  life. 
Most  of  their  saving  has  resulted  from  a  curtailment  in  ex- 
penditure for  finery  which  was  out  of  keeping  with  the  pocket- 
book  of  a  working  girl.  Then,  too,  the  young  men  who  have 
gotten  into  the  habit  of  saving  have  in  many  cases  shown 
shown  changes  of  habits  which  are  certainly  for  the  better.  The 
$15,000  representing  the  savings  of  the  hundred  and  fifty  young 
men  in  the  Levis  association  would  otherwise  have  been  spent, 
for  the  most  part,  in  wasteful  consumption,  and  much  of  it, 
doubtlessly,  in  ways  that  would  have  been  harmful  as  well. 
Moreover,  there  arises  a  self-respect  in  connection  with  econo- 
mic independence  which  shows  itself  in  the  whole  life  of  the 
community. 

Each  of  the  banks  also  runs  a  penny  savings  department  for 
school  children.  Here  we  find  the  most  striking  results  from 
very  small  savings.  At  Levis,  for  example,  according  to  the 
annual  report  of  November  30,  1909,  the  savings  of  the  children 
amounted  to  $3,787.67.  The  parish  of  I'Ancienne  Lorette  re- 
ports $811.06  on  hand  in  the  children's  department,  as  a  result 
of  ten  months'  operation;  while  the  children  of  Thedford 
Mines  have  saved  $501.27  in  two  months.  At  the  time  of  this 
report,  the  thirty-two  societies  were  reaching  nearly  three  hun- 
dred schools  within  the  province. 

This  brings  us  to  the  use  made  of  these  funds,  and  a  con- 
sideration of  the  question  as  to  whether  enterprise  is  being 
stimulated  or  not.  At  the  outset  we  must  acknowledge  that  it 
is  altogether  too  early  in  the  history  of  the  movement  to  accom- 
plish a  satisfactory  discussion  of  this  part  of  the  problem.  In 
the  next  chapter,  under  a  treatment  of  the  possible  usefulness 
of  these  societies  in  America,  we  will  touch  upon  the  stimula- 
tion of  enterprise  in  Europe  and  India.     But  such  results  have 


Economic  and  Social  Effects.  69 

been  attained  only  through  years  of  education,  and  through 
special  study  along  economic  and  technical  lines  by  the  leaders 
of  the  communities.  The  Levis  society  is  the  only  one  which 
has  as  yet  had  an  opportunity  to  accomplish  what  has  over  and 
over  again  been  achieved  in  Europe.  The  future  of  the  move- 
ment in  Quebec  depends  upon  her  priests  and  other  prominent 
citizens.  These  leaders  are  face  to  face  with  a  great  oppor- 
tunity. Should  they  seize  it  and  make  the  most  of  it,  the  agri- 
cultural and  general  industrial  situation  may  be  revolutionized 
within  a  decade.  The  example  of  Denmark  shows  what  might 
be  done  under  careful  education  and  able  leadership.  There  is 
the  possibility  that  Quebec,  instead  of  turning  loose  upon  the 
rest  of  America  throngs  of  "  cheap  "  unwelcome  immigrants, 
may  become  the  home  of  an  industrial  democracy  which  shall 
recall  her  exiled  children  by  the  assurance  of  better  times  than 
they  can  find  anywhere  else.  Her  fields  may  blossom  under 
scientific  culture.  Her  forests  may  flourish  so  as  to  be  a  source 
of  industry  and  wealth  for  generations  of  "  habitants "  yet 
unborn.  Her  wheels  may  turn  on  and  on  to  the  music  of  her 
exhaustless  water-power. 

But  we  must  turn  from  what  might  be  to  a  consideration  of 
what  is.  A  majority  of  the  associations  are  finding  a  demand 
for  their  funds  in  local  enterprise.  Some  two  or  three,  of  which 
the  Levis  society  is  one,  have  occasionally  had  a  greater  call  for 
loans  than  they  could  meet.  A  reference  to  the  table  of  loans 
on  page  15  shows  that  the  Levis  membership  have  not  been 
backward  in  taking  advantage  of  its  opportunities  in  the  use  of 
credit.  Nor  has  the  demand  for  loans  been  confined  to  any  one 
class.  Of  the  seventy  farmers,  about  twenty  freely  make  use 
of  credit.  Their  loans,  varying  in  amount  from  $25  to  $500, 
have  been  applied  in  draining  and  otherwise  improving  "their 
land,  in  buying  machinery,  in  extending  their  equipment  of 
buildings,  and  in  securing  a  better  grade  of  farm  stock.  The 
small  business  men  frequently  use  credit  to  secure  the  advan- 
tage of  cash  discounts  on  their  supplies  of  merchandise.  There 
are,  moreover,  several  instances  in  which  members  of  the  labor- 
ing class  have  become  independent  proprietors  in  a  small  way 


70  Co-operative  Banking  in  Quebec. 

through  the  use  of  the  funds  of  the  association.      Take  this 
ilkistration,  which  seems  worthy  of  special  notice : 

On  February  7,  1907,  Mr.  Desjardins  gave  this  incident  as 
part  of  his  evidence  before  the  Parhamentary  Committee: 
''  Last  spring  two  young  men,  brothers,  one  an  employee  in  a 
shoe  factory,  the  other  a  carpenter,  came  to  me  and  said :  '  We 
are  offered  a  great  advantage.  We  are  considering  buying  a 
house  at  very  easy  conditions.  We  hope  one  day  or  another 
to  marry  and  settle  down ;  we  would  like  to  live  alongside  of 
one  another,  and  this  house  is  divided  into  two  lodgings  that 
would  suit  us.  The  only  difficulty  in  the  whole  situation  is 
that  we  have  not  the  $200  that  the  vendor  asks  us  as  a  cash 
payment  on  the  purchase  price.  So  we  come  to  you  and  ask 
if  the  society  will  be  ready  to  loan  us  those  $200.  We  have 
no  real  security  to  give,  the  house  standing  as  security  for  the 
seller.  We  cannot  offer  anything  but  our  good  reputation,  and 
perhaps  our  mother  will  come  in  and  give  her  signature  as 
well.'  '  Well,'  I  said,  '  I  will  submit  the  question  to  the  board 
of  credit ;  come  to-morrow  and  I  will  let  you  know  the  answer.' 
The  next  day  the  question  was  submitted  to  the  board  and 
agreed  to  unanimously.  I  said  to  the  young  men,  '  Here  are 
the  $200,'  the  conditions  of  reimbursement  fixed  being  $20  a 
month,  or  ten  months  in  all.  The  loan  was  made,  the  house 
was  bought.  The  house  is  now  paying  for  itself  by  the  rent, 
and  the  $200  were  reimbursed  in  less  than  eight  months.  The 
two  young  men  were  so  completely  pleased  and  so  hopeful  that 
they  worked  almost  night  and  day  to  clear  that  off." 

While  in  Levis  last  summer  the  writer  enquired  about  these 
two  young  men.  President  Desjardins  replied:  ''That  is  one 
of  the  best  examples  of  the  benefit  resulting  from  our  Caisse. 
They  have  had  a  good  many  loans  since  then ;  and  have  always 
"been  very  punctual  in  their  repayments.  They  are  rapidly  win- 
ning a  place  among  the  well-to-do  citizens  of  our  community." 
Then  we  went  around  to  where  the  brothers,  with  two  or  three 
hired  hands,  were  at  work  in  their  own  little  planing-mill,  and 
heard  from  their  own  lips,  in  a  mixture  of  French  and  English, 


Economic  and  Social  Effects.  71 

the  story  of  their  success.  They  gave  La  Caisse  almost  all  the 
credit  for  their  prosperity. 

Besides  such  cases  of  greatly  stimulated  individual  enter- 
prise, we  find  as  a  result  of  the  introduction  of  these  societies  a 
general  improvement  in  business  methods.  Many  families  have 
adopted  the  plan  of  paying  cash  instead  of  running  accounts. 
For  example,  the  Reverend  M.  Ducharme  writes  that  for  years 
shop  credit  had  been  the  curse  of  his  parish.  Some  time  after 
the  establishment  of  "  La  Caisse  Populaire  de  Contrecoeur"  he 
proposed  that  the  community  adopt  the  "  spot  cash  "  basis  of 
doing  business.  After  some  deliberation,  and  not  a  little  oppo- 
sition, the  plan  was  agreed  to  by  most  of  the  members  of  the 
association.  Those  who  needed  assistance  secured  a  loan  from 
the  society  and  paid  their  bills.  Before  long  others  followed 
suit,  until  the  people  of  the  entire  parish  were  converted  to  the 
plan  of  living  within  their  income,  and  paying  cash.  This  in 
turn  led  to  much  greater  care  in  expenditure,  which  has  really 
raised  the  standard  of  living,  and  added  greatly  to  the  general 
prosperity  of  the  community.  Under  the  old  method  prices 
were  higher,  and,  before  they  knew  it,  people  were  often  so 
badly  in  debt  as  to  be  almost  bankrupt. 

The  general  looseness  of  business  methods  in  the  country  dis- 
tricts of  Quebec  results  in  a  good  deal  of  usury.  The  real  rates 
of  interest  are  frequently  disguised  by  some  device  or  secret 
agreement  between  the  borrower  and  lender.  Mr.  Desjardins 
gives  the  illustration  of  a  country  money-lender  who  had  an 
old  caleche  which  he  had  sold  at  least  twenty-five  times  for 
thirty  dollars  each  time,  as  a  condition  of  granting  a  loan.  The 
nominal  rate  on  these  loans  was  six  per  cent.  But  to  this  must 
be  added  the  price  of  the  caleche,  which  had  never  left  the 
premises  of  the  usurer. •^ 

Another  common  occurrence,  which  in  the  end  amounts  to 
the  same  thing  as  usury,  is  the  buying  of  implements  and 
machinery  on  the  '*  easy  payment  plan."  This  is  a  common 
plague,  inflicted  through  agents,  upon  industrial  communities. 
Organs,   pianos,   sewing   machines,   books,   pictures,    etc.,    are 

^Report  of  the  Special  Committee  on  Bill  No.  2,  1907,  page  14. 


72  Co-operative  Banking  in  Quebec. 

pressed  upon  wage-earners  on  the  easy  payment  plan  of  so 
much  per  week  or  month.  But  the  method  of  payment  which 
sounds  so  "  easy  "  as  the  agent  ghbly  repeats  his  well-learned 
rhyme,  is  difficult  enough  when  we  consider  the  prices  paid. 
To  take  one  illustration :  A  sewing  girl  in  Levis  was  in  need 
of  a  machine.  An  agent  called  and  proposed  to  sell  her  one  to 
be  paid  for  in  small  weekly  instalments.  She  was  a  member 
of  La  Caisse,  and  it  occurred  to  her  to  find  out  the  cash  price 
of  the  machine  at  a  regular  dealer's.  She  found  it  to  be  twenty 
dollars  less  than  she  would  have  to  pay  on  the  easy  payment 
plan.  So  she  put  in  her  application  for  a  loan  from  her  society. 
She  got  her  machine,  and  by  the  end  of  nine  months  had  repaid 
her  indebtedness  to  the  association.  The  interest  on  the  loan 
cost  her  $2.35,  which  left  a  clear  saving  of  $17.65."  Less  ex- 
treme instances  might  be  given  of  the  savings  made  by  farmers, 
who  borrowed  from  the  society  and  paid  cash  for  implements 
and  machinery,  instead  of  buying  them  on  the  instalment  plan 
from  the  local  agent.  But  we  simply  wish  to  illustrate  the  fact 
that  economic  waste  of  the  usury  type  is  being  eliminated  wher- 
ever co-operative  credit  is  established.  The  old-time  money- 
lender, who  preyed  upon  all  cases  of  extreme  need  and  business 
ignorance,  has  disappeared  from  Levis ;  and  the  indications  are 
that  the  experience  of  Europe  in  this  respect  will  repeat  itself 
throughout  the  province.  The  habit  of  counting  the  cost  is  a 
most  valuable  result  of  the  business  education  arising  from 
these  societies. 

Such  institutions  are  a  powerful  factor  in  inculcating  a  sense 
of  the  social  solidarity  and  economic  interdependence  which 
pervades  modern  society.  Even  the  pennies  of  the  infants  in 
the  kindergarten  play  their  part  in  promoting  the  general  wel- 
fare of  the  community.  Nowhere  can  we  find  more  strongly 
emphasized  the  paramount  importance  of  business  integrity  to 
the  welfare  of  our  social  fabric.  Each  society  is  a  little  world 
in  itself,  from  which  selfish  aggrandizement  must  be  rigorously 
excluded  in  the  interest  of  all  the  members.  Speculative  in- 
vestments and  foolish  expenditures  must  also  be  guarded 
against  if  the  association  is  to  avoid  a  financial  crisis.    Constant 


Economic  and  Social  Effects.  73 

vigilance  is  the  price  of  safety.  Social  ''  surveillance  "  must  be 
exercised  over  the  activity  of  every  member  of  the  group,  not 
with  the  purpose  of  suppressing  any  legitimate  individual 
initiative,  but  in  order  to  encourage  it,  and  make  its  inspiration 
a  force  in  the  life  of  the  society.  Long  experience  has  dictated 
to  these  little  .social  groups  certain  conditions  of  success  which 
might  be  advantageously  studied  by  the  modern  state. 

To  recapitulate  briefly  the  argument  of  this  chapter :  The 
province  of  Quebec  has  abundant  natural  resources,  and  a 
population  peculiarly  adapted  by  nature  to  develop  them.  These 
resources  are  being  depelted  in  the  most  wasteful  fashion.  All 
industry  is  in  a  backward  condition.  This  is  mainly  due,  we 
believe,  to  the  policy  of  educational  and  social  isolation  pursued 
by  the  Catholic  clergy.  Into  this  general  inertia  a  disturbing 
element  has  entered  through  a  party  bent  on  educational  and 
industrial  progress.  The  co-operative  credit  movement  appears 
at  an  opportune  time,  calling  attention  to  the  work  of  the 
church  in  Europe,  and  the  need  of  general  and  technical  educa- 
tion at  home.  The  result  is  the  establishment  of  a  system  of 
technical  schools.  Locally,  individual  societies  are  overcoming^ 
hoarding,  stimulating  enterprise,  modifying  personal  character 
through  the  inculcation  of  habits  of  thrift,  industry,  and  a  sense 
of  social  solidarity;  and  as  a  corollary  phenomenon,  the  usurer 
and  "  easy  payment "  men  are  forced  to  seek  other  fields  of 
operation. 


CHAPTER  IV. 

THE  POSSIBILITIES  OF  CO-OPERATIVE  CREDIT  IN  AMERICA. 

In  entering  upon  a  discussion  of  this  problem,  the  writer  is 
very  well  aware  of  the  difficulty  of  his  task,  and  of  the  impos- 
sibility of  reaching  very  definite  conclusions.  In  fact,  the 
person  who  would  start  into  a  consideration  of  this  question 
with  the  expectation  of  arriving  at  general  rules  and  universal 
judgments  applicable  to  America,  would  show  at  the  outset  his 
imperfect  grasp,  both  of  the  co-operative  movement  and  of  the 
complexity  of  American  conditions.  The  most  he  can  hope  for 
is  to  point  out  "  possibilities."  On  the  basis  of  the  evidence 
presented  by  the  whole  development  of  the  movement,  he  may 
conclude  that  there  are  still  many  situations  in  America  into 
which  these  associations  might  be  advantageously  introduced. 
Or,  on  the  other  hand,  he  may  decide  that  the  functions  per- 
formed by  co-operative  banks  abroad  are  for  the  most  part 
taken  care  of  in  America  by  other  institutions;  and  that  co- 
operative credit,  therefore,  can  never  attain  .a  very  extended 
field  of  activity.  Let  us  examine  the  general  movement  in 
some  of  its  more  typical  aspects,  and  proceed  to  enquire  in  how 
far  the  American  situation  would  seem  to  warrant  an  extension 
of  such  institutions  in  Canada  and  the  United  States. 

That  these  associations  have  achieved  a  large  measure  of 
success,  no  one  at  all  acquainted  with  the  facts  could  possibly 
deny.  Moreover,  it  is  a  success  which  has  been  attained  under 
the  most  diverse  social  and  economic  conditions.  At  the  one 
extreme,  among  the  poverty-stricken  millions  of  India,  there 
have  been  organized  within  the  short  period  of  the  past  five 
years,  over  2000  societies,  with  185,000  members,  and  a  work- 
ing capital  of  two  and  a  half  million  dollars.  A  correspondent 
to  the  London  Times  of  December,  1909,  writing  of  the  im- 
proved facilities  for  credit,  and  the  consequent  increasing  pros- 
perity, says :    "  In  many  villages  the  members  already  find  their 


Possibilities  in  America.  75 

wants  supplied  wholly  by  the  society,  and  the  face  of  the  money- 
lender is  not  seen.  Old  debts  are  paid  off  and  lands  redeemed 
from  mortgage.  Now  that  they  have  recovered  their  land, 
members  are  purchasing  more  cattle  and  sowing  crops  of  a 
higher  class.  Litigation  is  diminishing,  as  disputes  between  the 
members  are  decided  by  the  common  sense  of  the  society.  Thus 
the  movement  promises  not  only  to  supply  the  small  peasant 
proprietor  with  capital  on  easy  terms,  but  to  foster  the  growth 
of  thrift,  good  will  and  co-operation  in  many  directions ;  and 
there  seems  reasonable  hope  that  it  will  continue  to  spread  rap- 
idly among  the  millions  of  the  Indian  peasantry,  and  confer  on 
them  benefits  as  marvellous  as  those  it  has  bestowed  on  the 
indebted  landowners  and  farmers  of  several  European  coun- 
tries."^ These  societies  are  the  humble  Raiffeisen  type  of  vil- 
lage bank  with  fifty  to  one  hundred  members  each. 

At  the  other  extreme,  we  have  the  system  of  strong,  pros- 
perous People's  Banks  which  has  spread  over  Europe  catering 
to  the  well-to-do  commercial  and  industrial  classes  of  the  towns 
and  cities.  These  institutions  are,  in  many  instances,  doing  a 
much  more  up-to-date  banking  business  than  the  regular  banks 
of  the  country.  Between  these  extremes,  we  find  societies 
operating  in  all  sorts  of  intermediate  combinations  of  circum- 
stances, and  in  every  case  adapting  themselves  to  the  needs  of 
the  situation. 

A  thing  that  strikes  one  in  the  study  of  the  whole  movement 
is  that  in  those  countries  where  co-operative  banking  has  made 
most  progress,  its  greatest  achievement  has  been  the  populariz- 
ing of  banking  methods,  and  the  consequent  socializing  of 
capital  through  a  wider  use  of  credit.  Professor  Shortt,  who 
has  made  a  fairly  careful  study  of  banking  conditions  in 
Europe,  says  that,  outside  of  Great  Britain,  "  the  note  issue  is 
the  great  feature.  The  deposit  business  is  comparatively  small ; 
the  discount  business  is  not  on  the  same  basis  as  ours ;  but  the 
loaning  of  capital  in  the  shape  of  bank  notes  is  a  feature." 
The  people  do  their  business  in  actual  currency ;  and  when  they 

iFrom  a  Times  clipping  sent  by  Earl  Grey,  Governor-General  of 
Canada. 


7(y  Co-operative  Banking  in  Quebec. 

get  a  little  surplus,  they  hoard  it  up  rather  than  place  it  on 
deposit  in  the  banks.  Consequently,  it  is  chiefly  the  business 
men  of  the  middle  classes  who  have  dealings  with  the  banks. ^ 
When  poor  people  are  compelled  to  borrow,  they  seek  the  near- 
est money-lender  and  submit  to  his  terms.  These  transactions 
are  usually  kept  as  much  in  the  dark  as  possible,  because  it  is 
considered  a  disgrace  to  get  into  the  clutches  of  the  usurer. 
This  secrecy  prevents  the  formation  of  public  opinion  on  the 
subject  such  as  might  in  time  mitigate  the  evil.^  Even  where 
the  small  borrower  could  offer  sufficient  security  to  obtain  a 
loan  from  a  regular  bank,  he  is  forced  to  pay  rates  of  interest 
which  the  establishment  of  co-operative  credit  associations  has 
proven  to  be  unnecessarily  high.* 

That  this  situation  has  been  changed  wherever  co-operative 
credit  associations  have  gained  a  foothold,  is  the  testimony  of 
all  authorities.  True,  there  does  not  spring  up  at  once  the 
system  of  checks  and  drafts  which  plays  such  an  enormous  role 
in  American  business;  but  the  members  begin  to  place  their 
savings  on  deposit,  various  forms  of  discounts  come  into  use, 
the  usurer  disappears  from  the  scene,  and  the  use  of  credit 
arises  from  the  category  of  things  to  be  ashamed  of.^ 

Then,  too,  the  making  of  supervised  credit  available  on  such 
easy  terms  has  everywhere  in  Europe  been  a  great  stimulus  to 
the  use  of  capital  by  the  poorer  classes  in  enterprises  which 
would  otherwise  never  have  suggested  themselves.  The  funds 
are  at  the  command  of  the  man  who  knows  how  to  use  them 
profitably.  One  secures  a  loan  and  puts  in  a  drain  reclaiming 
a  waste  piece  of  land.  Another  invests  in  artificial  manure, 
supplying  elements  in  which  his  soil  is  deficient.  His  neighbor 
begins  to  look  about  for  a  profitable  investment,  and  so  there 
is  started  a  movement  in  which  the  spirit  of  enterprise  becomes 
contagious,  infecting  the  whole  community. 

2Professor  Shortt,  Report  of  Committee  on  Bill  No.  2,  1907,  page  39. 

3E.  A.  Pratt,  op.  cit.,  141-153. 

^Edward  T.  Peters,  Co-operative  Credit  Associations,  U.S.  Depart- 
ment of  Agriculture,  Division  of  Statistics,  Miscellaneous  Series,  Report 
No.  3,  page  15. 

5E.  A.  Pratt,  op.  cit.,  141-153. 


Possibilities  in  America.  77 


In  this  connection  it  must  be  noted  that,  in  those  European 
countries  where  the  banking  institutions  are  most  democratic, 
it  is  hardest  to  get  co-operative  credit  started.  In  England  and 
Scotland,  we  find  distributive  co-operation  very  strongly  de- 
veloped, and  also  considerable  progress  in  productive  co-opera- 
tion. But  in  spite  of  the  fact  that  such  an  able  apostle  of 
co-operative  banking  as  Mr.  Henry  W.  Wolflf  has  been  ex- 
pounding his  principles  to  his  fellow-countrymen  for  almost 
twenty  years,  the  movement  has  as  yet  achieved  but  an  insigni- 
ficant development  in  Great  Britain*  In  Ireland,  to  be  sure, 
under  the  enthusiastic  ministrations  of  Sir  Horace  Plunkett 
and  the  Irish  Agricultural  Organization  Society,  a  vigorous 
system  of  associations  is  being  organized.  But  there  we  have 
conditions  very  similar  to  those  under  which  the  Raiffeisen 
societies  have  achieved  such  success  among  the  peasantry  of 
Europe.^ 

The  slow  development  of  co-operative  credit  in  Great  Britain 
is  due  to  a  variety  of  causes.  In  the  first  place,  we  may  account 
for  it  by  the  natural  conservatism  of  the  Britisher,  and  his 
inherent  distrust  of  "new-fangled  "  ideas.  He  has  a  sturdy 
self-reliance,  which,  however  admirable  in  itself,  makes  the 
average  Englishman  appear  rather  unsociable.  He  is  "  a  poor 
mixer,"  to  use  one  of  our  expressive  slang  phrases,  and  rather 
unprogressive,  where  progress  depends,  as  it  is  coming  more 
and  more  to  depend  upon  social  co-operation  and  interdepend- 
ence. The  mutual  criticism,  the  supervision  of  the  use  of  loans, 
and  the  knowledge  of  each  other's  afifairs  upon  which  co-opera- 
tive credit  associations  rely  so  much,  is  very  distasteful  to  most 
Englishmen.  Moreover,  we  find  that  agricultural  conditions 
differ  widely  from  those  prevailing  on  the  continent.  There  are 
very  few  of  thie  small  independent  farming  peasantry  among 
whom  the  Raiffeisen  societies  have  accomplished  so  much  in 
France,  Italy  and  parts  of  Germany.     The  land  in  England  is 

'^Note :  In  August,  1910,  Earl  Carrington,  President  of  the  Board  of 
Agriculture,  announced  the  intention  of  the  British  Government  to  assist 
in  establishing  a  system  of  rural  credit  banks. 

^'On  England  and  Ireland,  see  C.  R.  Fay,  op.  cit,  74-75. 


7^  Co-operative  Banking  in  Quebec. 

almost  entirely  in  the  hands  of  large  estate  holders,  who  lease 
it  in  improved  farms  to  their  tenants.  These  tenants  are  better 
ofif  on  the  average  than  the  continental  freeholders.  They  have 
at  their  command  a  more  highly  developed  system  of  regular 
bank  credit,  and  experience  less  difficulty  in  taking  advantage 
of  it. 

But  all  this  does  not  prove  that  there  is  no  field  for  co-opera- 
tive credit  in  Great  Britain.  Mr.  E.  A.  Pratt  goes  into  this 
matter  fully  in  his  book,  "  The  Organization  of  Agriculture." 
On  the  basis  of  a  review  of  the  development  of  agricultural 
organization  in  Europe  and  America,  he  arrives  at  the  conclu- 
sion that  the  establishment  of  better  credit  facilities  is  a  funda- 
mental need  of  the  British  farmer.  He  says :  ''Another  factor 
in  the  situation  is  the  necessity  that  agricultural  credit  should 
go  hand  in  hand  with  agricultural  organization.  The  necessity 
for  this  dual  arrangement  has  been  proved  over  and  over  again 
on  the  continent  of  Europe,  and  though  the  financial  position 
of  the  British  agriculturists  in  general  may  be  more  favorable 
than  that  of  the  peasantry  in  various  other  countries  where  an 
easy  agricultural  credit  has  been  established  years  ago,  the  ex- 
treme desirability  of  such  credit  being  available  in  Britain  also 
is  beyond  any  possible  doubt."''  Again:  "  But  experience  has 
already  shown  that  no  really  eflfective  scheme  of  agricultural 
organization  on  a  widespread  basis  can  be  carried  out  even  in 
Britain  unless  supplemented  by  some  practical  system  of  co- 
operative agricultural  credit  banks,  arranged  on  so  comprehen- 
sive a  scale  as  to  meet  the  varying  wants  of  all  our  agricultural 
classes."^  Finally,  he  concludes :  "  Whether  the  British  farmer 
acts  individually  or  collectively,  the  financial  question  calls, 
indeed,  for  serious  consideration.  It  might  even  be  argued  that 
until  the  financial  problems  which  arise  have  been  satisfactorily 
disposed  of,  no  great  progress  can  be  made.® 

Again,  take  the  Kingdom  of  Denmark.  This  small  agricul- 
tural country  has  become  the  veritable  paradise  of  co-operation. 
Within  the  past  forty  years  the  movement  has  spread  until,  at 

7E.  A.  Pratt,  op.  cit.,  310-311. 
sibid.,  375.  »Ibid.,  377. 


Possibilities  in  America.  79 

the  close  of  1906,  two  hundred  thousand,  or  over  forty  per 
cent.,  of  its  five  hundred  thousand  famihes  were  members  of 
co-operative  societies.  The  whole  agricultural  industry  has 
been  practically  revolutionized  through  these  associations,  and 
the  general  standard  of  well-being  immensely  improved. ^^.  But 
singular  as  it  may  seem,  co-operative  banking  has  gained  no 
foothold  in  Denmark.  Mr.  Fay,  in  commenting  on  this  fact, 
attributes  it  to  the  democratic  level  of  the  ordinary  banks, 
together  with  the  fact  that  other  forms  of  co-operation  have 
made  the  farmers  so  prosperous  as  to  be  in  little  need  of  credit ; 
and  hence,  when  they  do  require  it,  they  find  on  difficulty  in 
satisfying  their  need  through  the  regular  banking  institutions.^^ 
The  experience  of  Denmark,  then,  does. not  form  for  any  other 
country,  under  existing  conditions,  an  argument  against  the 
adoption  of  co-operative  credit.  It  simply  means  that,  in  Den- 
mark, the  organization  of  agriculture  has  been  carried  to  such 
a  degree  of  perfection  through  other  co-operative  agencies  that 
credit  unions  are  unnecessary. 

As  we  study  the  movement  in  India,  and  in  the  different 
countries  of  Europe,  the  evidence  points  almost  invariably  to 
the  conclusion  that  co-operative  credit  has  been  one  of  the  most 
effective  agencies  in  promoting  thrift,  enterprise  and  general 
prosperity.  The  People's  Banks  have  everywhere  been  a  great 
boon  to  the  industrial  and  mercantile  classes  of  the  cities.  Im- 
poverished and  inert  rural  communities  have  awakened  into 
new  life,  as  if  by  magic,  where  the  Raiffeisen  societies  have 
gained  a  foothold.  Buildings  have  been  renovated,  live-stock 
improved,  new  machinery  purchased,  soil  fertility  restored  by 
the  use  of  fertilizers,  and  the  people  themselves  transformed, 
socially,  morally  and  intellectually,  by  these  associations. 

.Let  us  now  turn  from  this  evidence  of  the  success  of  co- 
operative credit  abroad  to  a  further  consideration  of  American' 
conditions.  Let  us  enquire  what  our  credit  facilities  are  and 
how  they  are  utilized  by  the  different  elements  of  our  popula- 

I'^C.  R.  Fay,  op.  cit.,  Chaoter  on  Denmark.     Report  on  Bill  oN.  2, 
1907,  pages  93-95. 

11 C.  R.  Fay,  op.  cit.,  75. 


80  Co-operative  Banking  in  Quebec. 

tion.  Let  us  also  ask  if  there  are  not  some  fundamental  gaps 
in  our  social  and  economic  structure  which  might  be  filled  in 
by  more  democratic  credit  facilities  than  we  now  possess. 

At  once  we  are  struck  by  a  decided  difference  between  our 
general  situation  and  that  of  Europe.  But  we  are  almost 
equally  surprised  by  the  contrast  presented  between  different 
sections  of  the  United  States  and  Canada.  In  the  first  place, 
we  find  that  our  regular  banking  institutions  are  much  more 
commonly  used  than  they  are  anywhere  in  Europe.  Our  work- 
ing classes,  small  tradesmen  and  prosperous  farmers  usually 
keep  a  bank  account;  and,  with  the  exception  of  our  French 
sections,  in  other  foreign  sections  and  in  backward  rural  dis- 
tricts, there  is  far  less  hoarding  of  notes  and  coin  than  we  find 
in  Europe. 

Moreover,  at  the  time  when  the  rural  need  is  greatest,  espe- 
cially in  our  western  states  and  provinces,  the  regular  banking 
institutions  perform  splendid  service  in  supplying  the  farmer 
with  the  credit  necessary  for  the  harvesting  and  marketing  of 
his  crops.  We  find  the  evidence  of  this  in  the  periodic  move- 
ment of  money  from  New  York  to  the  South  and  West  which 
begins  in  August  of  each  year  -^^  and  in  the  much  larger  de- 
mands upon  the  western  branches  of  the  Canadian  banks,, 
beginning  usually  about  the  first  of  September.  But  even  in 
this  rural  periodic  demand  we  find  much  that  reminds  us  of  the 
European  conditions  in  the  great  demand  for  currency.  The 
farmer  gets  credit  on  the  security  of  his  crops,  but  he  demands 
those  loans  in  actual  cash.  When  his  crops  are  sold  he  also 
demands  currency,  not  bank  credit,  in  payment. ^^ 

The  writer  was  brought  up  on  a  farm  in  the  centre  of  the 
western  Ontario  peninsula,  in  one  of  the  most  progressive  and 
prosperous  communities  of  small  farmers  he  has  come  across 
in  either  America  or  Europe.  In  the  market  towns  of  that 
section  the  banks  were  forced  to  provide  for  a  tremendous  de- 
mand for  currency  during  the  last  four  months  of  the  year.  In 
"  hauling  out  his  grain  "  the  farmer  was  paid  by  a  check  for 

i2Ely,  Outlines  of  Economics,  259. 
i-'*Ely,  op.  cit.,  259. 


Possibilities  in  America.  81 


each  load  he  took  to  market.  But  very  seldom  were  these 
checks  deposited  at  once  in  one  of  the  local  banks.  Usually 
they  accumulated  in  the  family  pocketbook  in  a  bureau  drawer 
for  a  week  or  two,  and  were  then  presented  at  the  bank  on 
which  they  were  drawn  for  cash  payment.  As  the  farmer  paid 
his  store  bills,  blacksmith's  accounts,  instalmnets  on  machinery 
to  the  local  implement  agent,  temporary  loans  which  he  had 
made,  etc.,  the  currency  gradually  found  its  way  back  into  the 
bank.  After  these  various  demands  had  been  met,  any  balance 
remaining  was  usually,  though  not  invariably,  placed  on  deposit, 
and  drawn  on  in  small  amounts  of  cash  as  the  farmer  needed 
the  money. 

To  one  accustomed  from  childhood  to  such  conditions,  in  a 
country  so  largely  devoted  to  agriculture,  and  who  also  knows 
the  joy  of  ''  pay  day  "  among  the  indu3trial  classes  of  our  cities, 
when  each  man  receives  his  check  and  hastens  to  have  it  con- 
verted into  the  "  long  green,"  it  has  always  seemed  that  the 
differences  between  the  banking  habits  of  the  masses  in  this 
country  and  in  Europe  have  been  somewhat  exaggerated.  That 
there  are  differences,  we  have  admitted  at  the  outset.  But  we 
are  far  from  convinced  that  the  contrast  is  so  great  as  the 
tremendous  volume  of  deposit  currency  passing  through  Ameri- 
can clearing  houses  would  indicate.  Reliable  statistics  are  not 
available,  but  it  is  undoubtedly  true  that  large  quantities  o£ 
these  credit  instruments  represent  stock  exchange  transactions 
of  a  purely  speculative  character.  Then,  too,  making  all  due 
allowance  for  the  wide  divergence  of  opinion  as  to  actual  con- 
ditions, it  is  certain  that  a  very  large  proportion  of  the  national 
income  of  the  United  States  goes  to  a  very  small  proportion  of 
the  citizens.  If  we  subtract  the  business  transactions  of  a  very 
small  percentage  of  our  total  population  from  the  mass  of  the 
business  done,  things  would  look  very  differently ;  and  we  would 
have  less  reason  to  glory  in  our  vaunted  American  superiority.* 

*Note :  Since  the  above  was  written,  there  has  come  to  hand  the 
report  of  the  National  Monetary  Commission  on  "  The  Use  of  Credit 
Instruments  in  Payments  in  the  United  States,"  compiled  by  Professor 
Kinley,  of  the  University  of  Illinois.  While  admitting  the  very  limited 
use  of  checks  by  the  laboring  classes,  it  is  estimated  that  50  or  60  per 


82  Co-operative  Banking  in  Quebec. 

On  the  other  hand,  it  must  be  admitted  that  the  average 
American  workman  and  small  farmer  is  better  acquainted  with 
business  methods  than  his  brother  in  Europe.  If  he  does  save, 
the  readier  transfer  of  property,  and  the  better  credit  facilities, 
make  it  much  easier  for  him  to  acquire  a  home  of  his  own.  The 
abundance  of  rich  free  land  in  the  Canadian  Northwest  is  still 
attracting  the  most  enterprising  from  among  the  working  classes 
by  the  opportunities  it  affords  to  become  independent  property 
owners.  Insurance  companies,  with  their  various  forms  of  en- 
dowment and  other  policies,  are  stimulating  and  compelling 
thrift.  The  postal  savings  bank  of  Canada,  and  the  corporate 
savings  banks  of  the  Uinted  States,  are  collecting  every  year 
large  amounts  of  money  among  the  wage  earners. 

But  in  spite  of  all  this,  we  are  far  from  satisfied  that  there 
is  no  field  in  America  for  some  form  of  co-operative  credit 
associations.  The  great  variety  of  industrial  and  other  securi- 
ties, it  has  been  suggested,  present  the  opportunity  whereby 
every  citizen  may  have  his  share  in  the  profits  of  our  industries, 
and  his  voice  in  their  management.  Theoretically  this  is  true. 
In  actual  practice,  however,  what  an  ironical  caricature  of  the 
reality  such  a  suggestion  contains !  This  very  system  of  se- 
curities with  its  plan  of  "  stock  voting  "  has  served  to  concen- 
trate the  industrial,  commercial,  financial,  and  political  power 
of  America  in  the  hands  of  a  more  or  less  selfish  plutocracy 
in  a  way  which  is  without  a  parallel  in  the  history  of  the  world. 
Moreover,  it  is  pretty  largely  through  the  accumulations  of  the 
small  saver  that  these  captains  of  industry  and  manipulators  of 

cent,  of  the  retail  trade,  and  90  per  cent,  of  the  wholesale  business,  or 
an  average  of  80  to  85  per  cent,  of  the  total  business  of  the  country,  is 
done  by  check. 

This  is  not  the  place  to  attempt  an  examination  of  the  findings  of 
the  commission.  There  is  brought  to  light  a  rapid  expansion  of  the 
use  of  credit  instruments.  Business  leaders  everywhere  use  checks  in 
their  dealings  with  each  other,  and  with  the  masses.  Wages  are  paid  by 
check,  and  in  the  same  way  the  farmer  is  paid  for  the  produce  of  agri- 
culture. The  cashing  of  these  checks  swells  the  proportion  of  retail 
business  settled  by  credit  instruments.  But  the  enormous  currency  re- 
quirements of  the  United  States  seem  ;o  point  to  business  habits  in  the 
masses  which  have  hardly  received  sufficient  emphasis  from  the  com- 
mission. 


Possibilities  in  America.  S3 

finance  get  their  power.  The  branch  bank  system  of  Canada, 
and  the  national  and  savings  bank  sqstems  of  the  United 
States,  with  the  secondary  and  central  reserve  cities,  esrve  to 
concentrate  capital  just  where  the  comparatively  small  number 
of  financial  leaders  can  most  effectually  use  it  in  their  own 
interests.  With  it  they  manipulate  the  stock  market  in  such  a 
way  as  to  render  the  average  securities  unsafe  from  the  stand- 
point of  the  small  investor.  They  use  it  to  form  monopolies 
which  control  prices,  import  cheap  foreign  workmen,  and  break 
the  back  of  American  organized  labor.  Through  their  contri- 
butions to  political  campaign  funds,  through  their  control  of 
political  bosses  who  deal  in  voters  in  bulk  and  in  members  by 
the  piece,  and  through  their  thoroughly  organized  system  of 
lobbying,  they  manipulate  the  small  savers'  earnings  to  make 
and  unmake  laws,  to  regulate  the  tariff,  to  fight  legislation 
favorable  to  labor,  to  suppress  public  ownership  in  every  form, 
to  secure  franchises  which  will  enable  them  to  further  mulct  the 
public,  and  to  monopolize  the  natural  resources  of  the  country. 
A  timely  illustration  of  this  last  point  is  seen  in  the  buying  up 
of  the  water-power  which  is  coming  to  be  such  an  important 
national  asset.  In  these,  and  many  other  ways,  our  present 
system  of  saving  is  made  subsidiary  to  forces  which  are  not 
working  for  the  general  social  welfare,  as  any  unbiassed  student 
of  the  situation  must  admit. 

Against  this  whole  system  of  concentrated  financial  power, 
with  all  that  follows  in  its  train,  co-operative  credit  associations 
work  most  effectively  by  stimulating  local  enterprise,  and  a 
local  demand  for  funds.  In  concluding  his  splendid  review  of 
the  effect  of  the  co-operative  banking  movement  in  the  five 
countries  where  it  was  then  chiefly  operative,  Mr.  T.  Peters, 
writing  in  1892,  says : 

"  That  there  should,  on  the  whole,  be  a  large  overflow  of 
capital  from  one  district,  one  region,  or  even  one  country  to 
another  is  no  doubt  inevitable,  and  as  far  as  it  occurs  under 
normal  conditions  there  is  nothing  in  it  to  deprecate ;  but  it  is  a 
thing  to  be  deprecated  when  capital,  sorely  wanted  for  the 
supply  of  local  needs,  is  sent  half  the  world's  circumference 


84  Co-operative  Banking  in  Quebec. 

away  in  search  of  an  investment  merely  for  the  want  of  a 
channel  of  communication  between  its  owners  and  their  near 
neighbors.  Such  a  channel  is,  to  a  great  extent,  supplied  by 
institutions  like  the  people's  banks  of  Europe  and  the  building 
and  loan  associations  of  the  United  States;  and  the  more  these 
institutions  are  perfected,  adapted  to  varying  wants,  and  dis- 
seminated among  the  people,  the  more  will  the  present  top-heavy 
fabric  of  modern  credit  be  broadened  in  its  foundation  and 
narrowed  in  its  overhanging  superstructure.  In  fact,  few 
things  could  do  so  much  to  guard  the  business  world  against 
the  financial  crises,  which  so  frequently  paralyze  its  industries, 
as  the  general  existence  of  institutions  which  tend  to  retain 
within  the  neighborhood  of  its  origin  all  the  capital  for  which 
there  is  a  potential  local  demand,  and  thus  keep  it  as  fully  as 
possible  under  the  continued  oversight  of  its  owners."^* 

Moreover,  from  the  standpoint  of  investment,  the  regular 
endowment  policy,  as  well  as  most  other  forms  of  old  age  and 
accident  insurance  provided  by  the  regular  companies,  is  not 
very  profitable  for  the  working  man.  Too  large  a  percentage 
of  what  he  must  pay  is  spent  for  advertising,  and  for  the  pay- 
ment of  agents  and  high-salaried  officials.  Dr.  Henderson  says : 
"  The  colossal  sums  poured  annually  from  slender  incomes  into 
the  coffers  of  the  '  industrial  insurance  '  companies  are  witness 
of  the  spirit  of  sacrifice  which  is  inspired  by  the  sentiment  of 
repugnance  to  burial  at  public  expense. "^^  Yes,  but  these  same 
colossal  sums  also  bear  witness  of  what  might  be  done  in  the 
way  of  stimulating  saving,  even  among  the  poorest,  by  an  effi- 
cient system  of  co-operative  credit. 

The  experience  which  America  has  already  had  with  co- 
operative credit  is  amply  sufficient  to  justify  its  extension.  I 
refer  not  to  the  Quebec  associations,  but  to  the  Building  and 
I.jDan  associations  of  the  United  States  and  Canada.  The  first 
of  these  associations  of  which  we  have  any  record  was  estab- 
lished at  Frankford,  a  suburb  of  Philadelphia,  January  3,  1831, 
and  was  known  as  the  Oxford  Provident  Building  Association. 

i*E.  T.  Peters,  op.  cit.,  116-117. 
^''American  Journal  of  Sociology,  xiv,  464. 


Possibilities  in  America.  85 

But  the  real  commencement  dates  from  the  decade  1840  to 
1850;  so  that  this  movement  was  well  under  way  when  Schulze 
organized  his  first  loan  society  at  Delitzsch-Eilenberg  in  1850.^® 
These  societies  have  accomplished  more  in  the  United  States 
than  all  other  forms  of  co-operation  put  together.  According 
to  the  last  annual  report  of  the  United  States  League  of  Local 
Building  and  Loan  Associations,  for  the  year  1908-9,  there 
were  5,599  affiliated  associations,  with  a  membership  of  1,920,- 
257,  and  total  assets  amounting  to  $784,175,753.  Besides  the 
Local  Associations,  there  are  thirty-five  National  Societies, 
with  $14,500,000  assets. 

In  these  societies,  as  in  the  European  and  Quebec  associa- 
tions, the  objects  are  the  promotion  of  thrift  and  the  granting 
of  credit  on  reasonable  terms  to  those  who  can  use  it.  They 
differ  in  the  fact  that  the  granting  of  credit  is  restricted  to  the 
purpose  of  building  and  improving  homes.  Savings  are  forced, 
as  in  the  town  banks  of  Europe,  by  regular  payments  on  large 
shares  of  stock.  These  payments,  together  with  the  "premium" 
and  and  interest  on  loans,  constitute  the  working  funds  of  the 
society  from  which  members  receive  advances. 

Suppose  a  man  has  a  lot  and  wishes  a  loan  of  $1000  to  build 
a  house.  He  joins  the  association  and  subscribes  for  one  share 
of  stock,  which  is  usually  listed  at  $200,  and  among  other  mem- 
bers bids  for  a  loan  of  $1000.  The  member  bidding  the  highest 
premium  gets  the  loan.  The  "  premium  "  is  defined  as  the 
margin  between  the  sum  which  is  actually  turned  over  to  the 
borrower  and  the  amount  which  he  bids.^''  In  the  report  of 
1893  there  were  found  to  be  sixty-eight  different  premium  plans 
existing  in  the  United  States.^®  When  the  member  secures  his 
loan,  he  must  subscribe  stock  sufficient  to  cover  its  face  value. 
He  enters  into  a  contract  to  pay  for  his  stock,  plus  the  interest 
on  the  loan  he  has  received,  in  a  stated  number  of  regular  in- 
stalments. In  computing  the  instalments,  allowance  is  made 
for  the  dividends  falling  annually  to  his  shares.      By  turning 

A^Ninth  Annual  Report  of  the  Commissioner  of  Labor,  1893,  p.  11. 
i^Adams  and  Sumner,  Labor  Problems,  392. 
isibid.,  388. 


86  Co-operative  Banking  in  Quebec. 

over  the  paid  up  shares,  he  receives  a  clear  deed  of  his  property, 
which  has  in  the  meantime  been  pledged  as  security  for  the 
loan. 

Thus,  in  a  narrower  sphere,  the  Building  and  Loan  Associa- 
tions, combining  the  savings  and  credit  features  with  the  in- 
stalment plan  of  payment,  bear  a  marked  similarity  to  the 
co-operative  credit  associations  of  Europe.  Their  great  weak- 
ness, as  compared  with  those  societies,  lies  in  the  fact  that  they 
have  failed  utterly  to  reach  the  great  masses  of  laborers,  who 
need  help  the  worst.^**  They  have  enabled  many  workmen  to 
obtain  homes,  it  is  true,  but  have  been  of  most  benefit  to  the 
salaried  members  of  the  middle  classes  and  small  business  and 
professional  men.^*^  Besides,  the  prevailing  opinion  here  in 
Michigan,  at  least,  seems  to  be  that  the  scheme  is  more  attrac- 
tive from  the  point  of  view  of  the  investor  seeking  profit- 
bearing  securities  than  from  that  of  the  person  seeking  credit 
on  reasonable  terms.  This  would  seem  to  bear  out  the  state- 
ment of  Professor  Hadley,  who  says :  "  The  chief  commercial 
profit  of  such  societies  goes  to  the  outside  investors  who  do  not 
intend  to  borrow."-^  If  we  take  this  into  consideration,  to- 
gether with  the  fact  that  a  man  has  one  vote  for  each  of  his 
paid  up  shares,  we  have  the  fundamental  weakness  of  these 
societies  from  the  standpoint  of  co-operative  credit.  The 
members  who  never  intend  to  borrow,  with  their  paid  up  shares, 
are  able  to  control  the  policy  of  the  association.  They  exer- 
cise their  power  in  their  own  interest,  rather  than  in  that  of 
the  non-capitalist  laboring  class.  So  the  policy  tends  to  become 
that  of  a  small  capitalist  investment  association  much  more 
than  that  of  a  workingman's  credit  union. 

This,  to  whatever  extent  it  is  true,  is  a  fatal  weakness  in 
Building  and  Loan  Associations  as  organizations  calculated  to 
extend  the  use  of  credit  among  the  laboring  classes.  But, 
nevertheless,  the  success  and  expansion  of  these  societies  in 

i»Ninth  Annual  Report,  etc.,  1893,  321-23. 
20Aclams  and  Sumner,  op.  cit.,  393. 

2iHadley,  Economics,  398,  quoted  by  Adams  and  Sumner,  op.  cit.,. 
393. 


Possibilities  in  America.  87 

America  points  to  a  deep-seated  need  among  the  industrial 
classes,  which  we  believe  could  be  met  by  the  co-operative  credit 
association,  with  its  smaller  shares,  easier  terms,  and  more 
economical  and  democratic  management. 

Now,  let  us  look  again  at  our  American  agricultural  situation, 
and  ask  if  there  is  not  here  a  need  which  properly  organized  co- 
operative credit  might  meet  better  than  anything  which  exists  at 
present.  We  have  already  referred  to  the  bank  credit  supplied 
on  the  security  of  the  crops  in  order  to  meet  the  expense  of 
harvesting,  threshing,  and  marketing  the  grain.  This  credit  is 
mainly  required  by  the  prosperous  agriculturists  of  the  South 
and  West.  Besides,  on  good  real  estate,  mortgage  credit  may 
be  had  on  fairly  reasonable  terms  all  over  America.  Credit  for 
farm  implements  and  machinery  is  usually  supplied,  at  a  rather 
high  cost,  by  the  local  implement  agent.  We  have  already 
noticed,  in  the  third  chapter,  the  advantage  of  co-operative 
credit  in  paying  for  farm  machinery.  The  ordinary  stores  of 
the  country  towns  bear  the  burden  of  ''  shop  credit "  for  the 
farming  community,  at  considerable  inconvenience  to  them- 
selves and  expense  to  those  who  get  their  goods  on  account. 
We  have  also  seen  the  revolution  effected  by  a  co-operative 
association  in  bringing  a  whole  community  round  to  a  cash 
basis  of  shopping. 

But  nowhere  in  America  have  we  adequate  credit  facilities 
for  small  improvements,  which,  however  necessary  and  profit- 
able in  the  long  run,  do  not  offer  immediate  returns  upon  the 
investment.  Among  the  necessary  outlays  in  every  progressive 
farming  community  are  improvements  in  stock,  repairing  and 
extension  of  buildings  and  mechanical  equipment,  and,  above 
all,  the  maintenance  of  the  fertility  of  the  soil.  This  last  is  of 
prime  importance,  and  it  is  a  factor  which  has  little  more  than 
begun  to  enter  into  our  American  system  of  agriculture.  Ameri- 
can agriculture  started  on  the  Atlantic  seaboard,  and  has 
gradually  extended  westward.  The  policy  has  been  to  get  all 
that  was  possible  out  of  the  soil  without  restoring  its  fertility; 
after  which  the  adventurous  and  progressive  moved  out  West 


88  Co-operative  Banking  in  Quebec. 

where  there  were  illimitable  fields  of  virgin  soil  awaiting  their 
plunder.  The  shiftless  and  poverty-stricken  were  left  in  pos- 
session of  the  old  worn-out  homesteads.  But  even  an  America 
could  not  stand  this  pace  forever.  Already  the  western  plains 
of  the  United  States  are  occupied  and  throbbing  with  life,  while 
those  of  Canada  are  rapidly  following  suit.  Large  districts  in 
the  eastern  provinces  of  Canada  and  in  the  Atlantic  states  are 
already  sounding  a  warning  note  of  possible  national  bank- 
ruptcy. 

In  a  very  suggestive  paper  on  the  "  Conservation  and  Preser- 
vation of  Soil  Fertility,"  Mr.  Cyril  G.  Hopkins,  chief  of  Agro- 
nomy and  Chemistry  in  the  University  of  Illinois  Agricultural 
Experiment  Station,  writes :  "  Within  a  hundred  miles  of  the 
spot  where  the  first  permanent  English  settlement  was  made  in 
our  country  one  can  to-day  buy  hundreds  of  thousands  of  acres 
of  arable  land  for  less  than  ten  dollars  an  acre, — land  which 
was  once  valued  at  fifty  dollars  an  acre,  and  would  now  be 
worth  more  than  one  hundred  dollars  an  acre  if  its  fertility  had 
been  maintained.  This  statement  does  not  include  any  reference 
to  lands  that  have  seriously  suffered  from  soil  erosion,  but  only 
to  the  great  areas  of  nearly  level  or  gently  undulating  farm 
lands  whose  productive  power  has  been  almost  destroyed  by  a 
hundred  years  or  more  of  common  cultivation  by  American 
farmers."  .  .  .  .  "  The  greatest  problem  of  the  United 
States,"  he  says,  .  .  .  .  "  is  to  bring  about  the  adoption  of 
systems  of  farming  that  will  maintain  or  increase  the  produc- 
tive power  of  American  soils. "^^ 

This  disastrous  exhaustion  of  the  soil,  under  present  methods 
of  farming,  is  creeping  slowly  but  surely  westward.  There  is 
but  one  remedy :  the  supplementing  of  farm  manure  by  mixing 
with  it  the  necessary  elements  of  soil  fertility  as  contained  in 
artificial  fertilizers.  Professor  Hopkins  goes  into  the  problem 
and  shows  how  the  natural  richness  of  the  soil  may  profitably 
be  restored  and  maintained,  and  even  increased  beyond  its  virgin 
fertility. 

But  this  process  of  soil  restoration,  as  well  as  the  improve- 
'»22Annals  of  the  American  Academy,  xxxiii,  631. 


Possibilities  in  America. 


ment  of  live  stock  and  mechanical  appliances,  necessitates  the 
expenditure  of  capital;  and  especially  for  the  man  on  a  run- 
down farm  this  capital  must  be  obtained  on  credit  of  some  kind. 
The  returns  on  such  an  investment  are  sure,  but  they  are  only 
slowly  and  gradually  realized.  It  is  a  form  of  investment  which 
the  ordinary  banker  does  not  care  to  handle,  and  indeed  cannot 
make  with  safety.  The  amounts  required  each  year  are  not 
large  enough  to  be  profitably  obtained  on  mortgage  credit.  Be- 
sides, under  either  of  these  forms  of  credit  the  lender's  interest 
is  paramount  in  making  the  loans  and  in  fixing  the  terms  of 
repayment. 

Just  here,  European  co-operative  credit  comes  in  and  identi- 
fies the  interest  of  the  borrower  with  the  lender.  It  makes  the 
loans  in  such  amounts,  and  at  such  times,  as  are  most  profitable 
to  the  farmer,  and  arranges  the  repayment  on  such  a  plan  as 
will  be  least  burdensome  to  the  borrower.  The  aim  is  to  make 
the  investment  repay  the  loan  out  of  its  own  natural  increase. 
For  the  holders  of  large  estates,  we  have  co-operative  mortgage 
credit  supplied  on  a  large  scale  by  institutions  on  the  order  of 
the  Prussian  Landschaften.^^  Then,  in  various  European  coun- 
tries, are  organized  societies  dealing  in  credit  on  mortgages  for 
smaller  land  owners.  Such  are  the  Bavarian  society  and  similar 
associations,  some  of  which  are  independent,  and  others  sub- 
sidized by  the  state.^*  But  by  far  the  most  useful  to  the  small 
landholder  are  the  various  co-operative  banks.  Writers  who 
have  made  a  personal  study  of  the  workings  of  these  societies 
in  Europe  are  unanimous  in  their  enthusiasm  for  the  good  re- 
sults they  have  accomplished.  In  many  districts  the  whole 
agricultural  situation  has  been  revolutionized.  Not  only  have 
loans  been  supplied  in  such  amounts  and  on  such  terms  as  are 
in  the  best  interests  of  the  small  farmer,  but  the  leaders  in 
every  community  have  been  stimulated  to  a  study  of  scientific 
methods  of  agriculture  so  as  to  lead  to  the  most  profitable  use 
of  the  loans  granted.      Under  the  system  of  loan  supervision 


23Henry  W.  Wolff,  op.  cit.,  225  et  seq. 
24Ibid.,  202. 


90  Co-operative  Banking  in  Quebec. 

the  peasant  farmers  have  vied  with  each  other  in  getting 
results. ^^ 

Now,  if  our  run-down  and  half-dead  eastern  provinces  of 
Canada,  and  the  impoverished  agricultural  areas  of  the  Atlantic 
states,  could  come  under  the  influence  of  such  a  movement  as 
that,  there  is  every  reason  to  believe  that  similar  results  could 
be  achieved.  The  question  is,  could  such  a  movement  be  started 
with  reasonable  prospects  of  success  in  these  districts?  The 
answer  to  this  question  necessitates  a  brief  examination  of  the 
conditions  and  forces  which  have  been  responsible  for  the  suc- 
cess of  the  European  movemnet,  and  an  inquiry  as  to  how  far 
they  could  be  relied  upon  in  America. 

In  the  first  place,  it  has  been  maintained  that  where  co-opera- 
tive banking  has  flourished  in  Europe,  we  find  a  marked  uni- 
formity of  population,  and  a  stability  of  occupation  and 
residence  which  are  almost  entirely  wanting  in  America;  and, 
since  successful  co-operative  credit  depends  so  much  on  mutual 
knowledge  of  each  other's  character  and  financial  standing,  this 
instability  is  said  to  form  an  insurmountable  barrier  to  the 
extended  usefulness  of  these  associations  in  the  United  States 
and  Canada.  The  fixity  of  population  is  undoubtedly  a  great 
advantage  in  the  formation  and  operation  of  co-operative  socie- 
ties in  Europe.  This  stability  could  not  be  found  to  such  an 
extent  in  America ;  and  especially  is  this  true  of  the  newer  sec- 
tions. But  as  Mr.  Peters,  in  his  consideration  of  this  difficulty,, 
concludes :  "  There  is,  however,  a  vast  field  in  our  own  country 
in  which  a  sufficiently  large  part  of  the  population  has  all  the 
fixity  necessary  for  co-operative  purposes. "^^  We  think  we 
might  go  farther  even  than  this,  and  say,  that  with  a  careful 
selection  of  members,  and  something  of  the  Building  and  Loan 
Association  plan  of  securing  advances,  there  is  no  part  of 
America  to  which  some  form  of  co-operative  credit  could  not 
be  adapted.     It  might  not  be  an  exact  repetition  of  any  type  of 

2"H.  W.  Wolff,  op.  cit.,  375  et  seq. ;  Co-operative  Credit  Banks,  47-8. 
E.  A.  Pratt,  op.  cit.,  123  and  310.  E.  T.  Peters,  op.  cit.,  15,  See  also 
various  papers  and  resolutions  of  the  International  Congress  at  Paris, 
1900.. 

26E.  T.  Peters,  op.  cit,  113. 


Possibilities  in  America.  91 

society  existing  at  present;  but  the  type  is  not  the  important 
consideration.  The  great  thing  is  to  secure  some  plan  to  en- 
courage saving,  and  the  democratic  use  of  the  accumulated 
funds  in  promoting  local  enterprise. 

For  eastern  Ontario,  Quebec,  the  Maritime  Provinces,  and  a 
large  part  of  the  eastern  states,  with  their  stable,  slow -going 
populations,  the  type  of  society  established  by  Mr.  Desjardins 
would  probably  prove  admirably  adapted.  For  the  more  busy 
progressive  regions  of  the  west,  we  believe  another  type  would 
have  to  the  worked  out.  The  Quebec  type  might  do  for  many 
country  regions.  But  in  other  rural  communities,  and  in  the 
cities  and  towns,  societies  would  have  to  be  run  on  a  scale  large 
enough  to  afford  adequately  paid  management  and  help,  some- 
what after  the  plan  of  the  Schulze-Delitzsch  banks  of  Europe. 
In  the  organization  and  management  of  co-operative  credit  for 
the  busier  communities,  the  Building  and  Loan  Associations 
afford  valuable  suggestions. 

Then  comes  the  question  of  government  aid.  In  the  majority 
of  European  countries,  as  we  have  seen,  government  assistance 
has  been  a  feature  in  the  development  of  the  movement.  Little 
wonder,  for  example,  that  the  membership  of  the  "  Caisses 
Regionales  "  in  France  increases  rapidly !  From  their  state 
supplied  funds,  the  affiliated  societies  are  able  to  make  loans  at 
from  one  to  four  per  cent,  interest.  This  is  probably  the  most 
extreme  case ;  but  in  many  others  the  state  bounty  has  been  a 
big  factor  in  swelling  the  yearly  transactions  into  top-heavy 
proportions,  as  compared  with  the  small  effort  at  self-help  put 
forth  by  the  societies.  On  the  other  hand,  we  have  the  develop- 
ment of  co-operative  savings  in  Italy,  where  the  associations 
not  only  receive  no  state  aid,  but  contribute  their  full  share  of 
taxes  for  the  support  of  the  government. 

Mr.  Desjardins  is  strongly  opposed  to  any  form  of  state  or 
other  philanthropic  pampering.  He  holds  that  the  only  secure 
basis  is  self-reliance  and  individual  thrift.  Considerable  evi- 
dence might  be  adduced  from  European  experience  in  support 
of  this  position,  which  has  the  approval  of  the  eminent  special- 


92  Co-operative  Banking  in  Quebec. 

ist,  Henry  W.  Wolff.  On  the  basis  of  the  widest  study  of 
co-operative  savings  which  has  probably  yet  been  made  by  any 
authority,  he  concludes  that  any  help  given  should  be  tem- 
porary, that  local  help  is  better  than  central  help,  and  that  state 
help  is  never  desirable.^'' 

Besides,  there  is  a  greater  margin  for  savings  among  the 
working  classes  in  America  than  among  those  of  any  other 
country.  The  extravagance  of  our  working  classes  is  notorious. 
If  co-operative  credit  has  been  able  to  make  such  progress  inde- 
pendently of  state  aid  in  a  country  like  Italy,  we  may  safely 
dismiss  any  such  proposition  as  the  necessity  of  government 
assistance  in  Canada  and  the  United  States. 

But  there  is  a  way  in  which  the  state  can  assist  co-operative 
credit,  which  experience  would  indicate  to  be  almost  necessary 
to  its  progress  and  success.  That  is,  by  passing  legislation 
recognizing  such  societies,  placing  them  upon  a  legal  basis,  and 
setting  forth  such  general  principles  as  have  been  expedient  in 
securing  safety  and  a  measure  of  uniformity.  In  his  study  of 
co-operative  credit  made  in  1892,  Mr.  Peters  found  that  the 
multiplication  and  prosperity  of  these  associations  was  to  a 
large  extent  dependent  upon  the  existence  of  appropriate  laws. 
He  refers  especially  to  Italy,  where  co-operative  credit  associa- 
tions had  been  in  existence  for  eighteen  years  before  they  re- 
ceived legal  recognition  by  the  code  of  1882.  Up  to  that  time 
there  were  but  171  societies  in  existence.  Under  a  recognized 
legal  status  the  number  of  associations  had  increased  by  1889 
to  692.2« 

In  Canada  the  Province  of  Quebec  has  led  the  way  with  the 
Quebec  Syndicates  Act  of  1906 ;  and  a  hard  fight  is  being  made 
for  Dominion  legislation.  In  the  United  States,  Massachusetts, 
which  has  proverbially  been  the  social  and  intellectual  leader  of 
the  union,  has  given  the  weight  of  its  prestige  to  the  movement 

27H.  W.  Wolff,  Co-operative  Banking,  298,  cf.  Peoples'  Banks,  20, 
21,  26,  etc. 

28E.  T.  Peters,  op.  cit.,  113. 


Possibilities  in  America.  93 

by  the  act  of  1909.  Its  influence  is  not  likely  to  be  lost  upon 
the  other  states;  so  that  the  future  of  co-operative  credit  is 
beginning  to  look  hopeful  in  so  far  as  the  necessary  legal  status 
is  concerned. 

Another  important  factor  in  the  European  movement  has 
been  the  encouragement  given  by  religious  denominations,  and 
especially  by  the  Roman  Catholic  Church.  In  intellectual  lead- 
ership, as  well  as  in  the  recognition  of  her  infallibility  in  matters 
spiritual,  this  wonderful  organization  is  surely  losing  ground 
on  the  continent  of  Europe.  It  would  seem  as  if,  instinctively 
feeling  this,  she  were  beginning  to  reassert  her  perennial  vitality 
through  a  determination  to  excel  her  adversaries  in  the  leader- 
ship in  the  practical  affairs  which  form  the  basis  for  all  that 
is  higher  in  life.  Among  other  things  she  has  been  quick  to 
recognize  the  value  of  co-operative  credit. 

In  Belgium,  for  instance,  the  great  foe  of  the  church  is  so- 
cialism. To  offset  the  socialistic  tendency,  the  priests  have  been 
compelled  to  become  technical  students  and  leaders  in  social 
reform.  They  constitute  the  practical  leaders  of  their  parishes, 
and  in  this  way  they  have  been  able  to  stem  the  tide  of  social- 
ism in  all  but  the  large  cities.  They  are  everywhere  found 
leading  in  agricultural  associations  and  in  co-operative  societies ; 
and  to  their  assistance  is  certainly  due  much  of  the  success 
which  has  been  attained. ^^  In  Italy,  too,  in  1894,  out  of  904 
banks  then  in  existence,  779  had  been  organized  by  priests. ^^ 
We  might  give  numerous  other  illustrations  of  the  influence  of 
the  clergy  in  European  movement,  but  these  are  sufficient  for 
our  purpose. 

In  America,  the  Province  of  Quebec  presents  the  sole  exam- 
ple of  a  uniform  population  under  the  dominance  of  the  Catho- 
lic church.  A  reference  to  the  list  of  associations  above  will 
show  at  a  glance  that  in  the  mtater  of  co-operative  leadership 
the  French  clergy  in  Canada  are  rising  to  the  occasion  and 
emulating  their  brother  clergymen  in  Europe.  If  the  move- 
ment continues  to  bear  out  its  present  promise  of  success,  we 

2»E.  A.  Pratt,  op.  cit.,  93-102. 
3"lbid.,  119. 


94  Co-operative  Banking  in  Quebec. 

see  no  reason  why  the  Catholic  clergy  all  over  America  should 
not  assist  in  organizing  societies  in  their  parishes. 

As  for  the  Protestant  clergy  of  America,  little  can  be  ex- 
pected in  the  way  of  practical  social  leadership  outside  of  their 
general  support  of  all  good  works.  Only  a  very  few  of  the 
theological  schools  are  thus  far  giving  their  men  any  adequate 
training  for  social  or  intellectual  leadership.  It  is  to  be  hoped 
that  the  time  will  come  when  the  church  will  in  some  way 
readjust  herself  to  changed  social  and  intellectual  conditions. 
This  ought  to  come  through  the  theological  schools.  At  present 
the  overwhelming  majority  of  these  schools  are  entirely  out  of 
touch  with  the  world  of  truth  as  modern  scientific  scholarship 
counts  truth.  Hence,  the  clergy  cannot  command  intellectual 
respect.  Nor  are  they  given  any  basis  on  which  to  grapple  with 
the  practical  problems  that  confront  modern  society.  When  the 
present  theological  studies  shall  have  found  their  perspective  in 
the  general  religious  evolution  of  the  race,  and  when  two-thirds 
of  the  time  now  devoted  to  mental  gymnastics  in  the  culture  of 
one  short  epoch  of  the  past  shall  have  come  to  be  devoted  to 
the  problems  of  the  Hving  present,  we  may  expect  to  hear  from 
the  church  to-day  the  voice  of  authority  as  the  prophets  spoke 
of  old.  Their  bible  was  the  society  in  which  they  lived.  Their 
"  voice  of  Javeh  "  was  the  crying  social  and  political  need  of 
the  day.  Using  the  language  of  their  time,  they  gave  expres- 
sion to  their  message ;  and  that  old  message  has  been  reiterated 
ever  since.  When  social  and  individual  psychology  shall  have 
supplanted  dogma,  when  the  social  sciences  shall  be  taught 
instead  of  apologetics,  this  parrot  mimicry  will  cease  and  the 
voice  of  prophecy  will  be  heard  again.  Until  then,  secular 
leaders  who  are  wrestling  with  the  practical  problems  which 
confront  our  society  must  continue  to  lament  the  inefficiency  of 
the  church  leaders. 

But  co-operation,  if  it  is  going  to  succeed,  must  have  leader- 
ship. If  the  history  of  the  movement  proves  anything,  it  cer- 
tainly demonstrates  the  high  value  of  capable,  enthusiastic  indi- 
vidual leaders. ^^    We  have  seen  the  movement  at  its  inception 

•■^iCf.  E.  T.  Peters,  op.  cit,  114. 


Possibilities  in  America.  95 

championed  by  Schulze  and  Raiileisen,  men  of  great  ability  and 
recognized  social  and  political  standing.  We  have  also  had 
occasion  to  refer  to  the  leadership  of  the  Italian  movement  by 
Luigi  Luzzatti.  His  enthusiastic  support  of  the  movement,  and 
his  genius  in  adapting  the  institution  to  Italian  conditions,  have 
given  his  name  a  place  in  the  history  of  co-operative  credit 
almost  on  a  par  with  those  of  Schulze  and  Raiffeisen.  He  was 
a  man  of  splendid  ability,  and  subsequently  became  Italian  Min- 
ister of  Finance.  Among  other  great  leaders  we  might  mention 
Herr  Schenk  in  Germany,  Dr.  Ziller  in  Austria,  WoUenborg  in 
Italy,  Longuimine  in  Russia,  and  Sir  Horace  Plunkett  in  Ire- 
land. These  are  all  men  of  great  ability,  combining  in  their 
personality  a  high  type  of  character  along  with  an  enthusiasm 
which  refused  to  be  balked  by  difficulty. 

Most  new  departures  from  long-established  custom  must,  in 
the  first  instance,  find  their  chief  support  in  such  individuals. 
If  the  idea  contains  the  germs  of  vitality,  it  will  in  time  be  taken 
into  the  social  fabric  and  propagate  itself.  Many  a  Jesus  has 
come  to  his  Gethsemane  in  doubt  as  to  whether  or  not  his  life 
work  had  been  in  vain.  The  promoters  of  co-operative  credit 
associations  have  come  in  for  their  share  of  discouragement; 
but  the  great  leaders  have  all  lived  to  see  their  ideals  in  a  large 
measure  realized.  Their  example  and  their  reward  should  give 
encouragement  to  those  whose  life's  task  takes  a  similar  form. 

In  America  there  has  never  been  any  lack  of  leadership  to 
champion  a  worthy  cause.  Let  the  need  be  sufficiently  pressing, 
and  there  will  be  found  men  and  women  in  plenty  with  the 
ability  and  courage  to  face  the  problem.  The  most  momentous 
issue  which  confronts  America  to-day  is  that  presented  by  the 
unequal  distribution  of  wealth.  Upon  the  solution  of  this  prob- 
lem hinges,  to  a  great  extent,  the  settlement  of  most  of  the 
burning  questions  which  confront  our  industrial,  social,  politi- 
cal and  intellectual  life.  We  trust  that  we  have  made  clear  that 
co-operative  credit  associations,  as  Mr.  Desjardins  is  bringing 
them  before  the  people  of  Canada  and  the  United  States,  sug- 
gest at  least  the  possibility  of  ameliorating  some  of  the  econo- 


96  Co-operative  Banking  in  Quebec. 

mic  anomalies.  The  need  at  present  is  for  other  leaders,  with 
something  of  his  enthusiasm  and  unselfishness,  to  work  out 
adaptations  of  the  co-operative  principle  which  will  meet  the 
varied  conditions  of  all  our  agricultural  and  industrial  com- 
munities. 


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